“I don’t think there is an issue because of the loan-to-value parameters; the max LTV we go to, for example, is 75 percent,” Elliott Pratt of Mortgage Network told Mortgage Professional America. “Only the right people are getting into them and the wrong people were getting into them before.
“An interest-only loan is only for more sophisticated borrowers – those with low loan to value and a high FICO score.”
Many may have initially been wary of the increase in interest-only products but, as Pratt notes, many of these lenders are taking steps to ensure only the safest clients qualify for them.
United Wholesale Mortgage, for example, just launched an interest-only financing option exclusively for clients who have a minimum FICO score of 720 and a down payment of at least 20 percent.
“We expect the program to be an incredibly popular option for well-informed borrowers, and in turn, a significant boom for mortgage originators,” said UWM CEO Mat Ishbia. “The purpose of the program is not to enable a consumer to afford a larger house; it’s for savvy borrowers who can regularly afford a house on a 30-year fixed mortgage, but choose the interest-only option to save additional discretionary income.”
For his part, senior loan officer Gregg Foster thinks interest-only mortgages are only a good fit for certain clients.
“It all depends on the occupation of the borrower,” Foster, of Nova Home Loans told MPA. “If they’re self-employed or receive regular bonuses at work, they can regularly put money toward the principle.”
More and more lenders are embracing interest-only mortgage products mere years after these types of products helped contribute to the housing correction, but there is nothing to worry about, say certain professionals.