Home Loans -- Federal Regulators Warn Lenders to Be More CarefulWritten by Charles Essmeier
Federal banking regulators have recently expressed some concern over housing market as home prices in United States have risen to record levels. While homes are more unaffordable than ever for many people, lending market remains strong, mostly because of introduction of new, ever-more-flexible types of loans. While these newer loan types, such as interest-only loan, make buying a home easier for some borrowers, they also propose a greater risk to lender.
The lending market has been quite aggressive during last five years, as investors and homebuyers have purchased real estate in record numbers. Buyers who are skittish about investing in stocks have put their money into real estate instead, and prices have climbed to record levels. Lenders have been all too happy to accommodate long line of customers in their offices with an ever-increasing array of products. With hundreds of loan types available, nearly everyone can qualify for some type of mortgage today. The problem, as regulators point out, is that some of more popular types of loans are inherently risky. Two such examples are interest-only loan, and home equity loans that exceed 100% of
| | Home Loans -- The Hot New Product? The 30-year MortgageWritten by Charles Essmeier
In recent years, mortgage industry has introduced dozens of new types of loans. The needs of every borrower are different, so mortgage companies have tried to come up with an answer for every problem. They’ve introduced 40-year mortgages, promoted 15-year mortgages, and introduced wildest array of variable-rate mortgages imaginable. There are mortgages that have interest rates that adjust every few months, every few years, or just once. A recently popular product that thrives on East and West coasts is interest-only mortgage, which reduces payments by not requiring payment on loan’s principal for first few years of loan. The prospective homebuyer could have as many as one hundred possible types of loans to choose from when searching for a mortgage. Amidst this huge array of loan types, one type is growing in popularity faster than all rest, and it may surprise you. The fastest-growing type of mortgage in America right now is traditional 30-year, fixed-rate loan. Last year, only about 35% of all borrowers took out a 30 year, fixed-rate loan, but so far this year, rate has increased to nearly 50%.
This may seem odd, as most everyone has been opting for adjustable-rate mortgages for last few years. Adjustable rate mortgages tend to offer lower interest rates, and lower interest rates mean lower payments. These loans have been popular with buyers who move often, have lower incomes or buyers
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