Home Mortgages: Housing-Boom Loans That Are Still Out There
Credit.com | September 30, 2013 | link
You don’t hear much about certain types of mortgages these days. Option ARMs, interest-only, stated income, no-money down, teaser rates — many of the most popular types of mortgages from the days of the housing bubble have virtually disappeared. But are they really extinct? Or have they simply gone into hibernation, waiting to emerge again when the economic climate is once again favorable for them?
While some of these truly seem to be gone for good, others have simply retreated to a specific niche in the market. And still others are beginning to re-emerge after a period of dormancy. Here’s a look at some of the better known “extinct” mortgages, along with what mortgage professionals have to say about their current status.
1. Stated Income: Stated income mortgages, or “liar loans” as they were known during the housing bubble, were widely blamed for enabling many borrowers to get into mortgages they couldn’t afford. They’re called stated income because no proof of the borrower’s income is required — the borrower can simply state an income figure and the lender will accept it.
These days, you can’t get a mainstream mortgage –- a conforming loan backed by Fannie Mae or Freddie Mac, or one backed by a government entity such as the Federal Housing Administration or the U.S. Department of Veterans Affairs -– without documenting your income. However, specialized lenders are beginning to deal in them once again. Why? Because stated income loans have long been popular with self-employed individuals who maximize the deductions on their tax returns, or who have substantial assets but whose income varies from year to year. As a result, their tax returns may not give a full picture of their financial state.