$200K for $660 a month? how??

[jrockfl]

I have seen little ads on the web for mortgages with really low rates like $200K for $660 a month, how is this possible?

[71tr]

There are all sorts of nontraditional mortgage products available.  Using teaser rates, negative amortization, interest only etc. can make the payment seem very low.  Be wary, if you don't manage your finances well or the real estate market turns on you these cheap loans could turn on you.

[wealthrx]

These are most likely Option Arm loans! These are loan that give you several
monthly payment options every 30 days. You can decide which option is needed
every month.

Options for 200k loan at 7%:

1.) Interest only payment ( 1,166.67) - Nothing applied to principal
2.) Principal & Interest payment ( 1,330.60) - Normal traditional payment
3.) Minimum payment ( 666.67) - Partial interest only payment (Usually 3% lower)

Obviously by making the Minimum payment option you will create what's
called Negative Amoritization. This means that at some point in the loan
that you will owe More than what you borrowed originally. In a depreciating
market this is a very risky loan option.

My advise- if you cannot afford the Traditional payment option, do not get
involved in this type of high risk activity.

[jrockfl]

Thanks guys! I have a hml loan right now and my rehab went on the market last week, I'm just thinking ahead if I can't sell it and need to rent it out.

[briank]

Very good advice here.  These loans are good for certain people, but they are pushed way too hard by some loan officers.  The kind of person there are good for are people who have good, but unpredictable incomes (like us mortgage guys) AND are disciplined enough not to abuse the neg am payments.

[ronsam4]

These are option arm programs. Truthfully there is only one that is any good thru Golden West Financial, it has a bi-weekly payment and allows you to pat off in 25 yrs instead pf 30. You have to be committed to the property for 3 yr however because of the pre-pay.

Ronald Sampson