Professional Real Estate Service

Specialty Mortgages: Risks and Rewards

In high-priced housing markets, it can be difficult to afford a home. That's why a growing number of home buyers are forgoing traditional fixed-rate mortgages and standard adjustable-rate mortgages and instead opting for a specialty mortgage that lets them "stretch" their income so they can qualify for a larger loan.

But before you choose one of these mortgages, make sure you understand the risks and how they work.

Specialty mortgages often begin with a low introductory interest rate or payment plan - a "teaser"- but the monthly mortgage payments are likely to increase a lot in the future. Some are "low documentation" mortgages that come with easier standards for qualifying, but also higher interest rates or higher fees. Some lenders will loan you 100 percent or more of the home's value, but these mortgages can present a big financial risk if the value of the house drops.

Specialty Mortgages Can:

Common Types of Specialty Mortgages:

Questions to Consider Before Choosing a Specialty Mortgage:

Be sure you work with a REALTOR® and lender who can discuss different options and address your questions and concerns!

Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2003. All rights reserved.