Despite lenders tightening the reins there are still a lot of mortgages out there that look attractive, but have a down side.
The Multiple-Choice Mortgage is considered the riskiest. This adjustable rate mortgage lets buyers choose from four monthly payments. You could pay interest and principal, which is good, but you could also choose to make a payment so small it doesn't even cover the interest.Cash-out financing is where you take out a mortgage for more than a home is worth. If your home doesn't appreciate enough to cover the loan you're in the hole when you go to sell. Lenders will also charge higher interest rates for these loans.Adjustable Rate Mortgages or ARMS just don't make sense since fixed rates are so low. It is better to lock in than to face an interest rate increase.Stay away from interest-only payments. Borrowers don't pay down any principle for the first three, five or even seven years of their loan. Read the fine print. Many times once the interest only period is gone, the monthly payments balloon to cover the interest.
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