Oh this is a great sign.
It does sound like the parameters around these new interest only loans are pretty conservative, 20% down, 720 FICO score, etc. But take it as a bellwether. Watch to see if more of this stuff comes on the market, with less stringent guidelines. Caution, always caution when it comes to housing, which is a highly government manipulated market.
“The value of the home is perceived to be worth more than what it is, so if you’re using it for a refinance, you’re not actually requiring cash out, you’re using equity from the home,” said Mitria Wilson, vice president of government affairs at the Center for Responsible Lending. “There is always the chance that the house is not worth the value that’s stated.”
Wilson concedes that the loans will not be nearly as risky as they were during the last housing boom, before all lenders were required to ensure borrowers’ ability to repay on all loans.
“It’s a far riskier product, a product that some consumers will be able to utilize beneficially, but by and large, most consumers do better with a 30-year fixed-rate mortgage,” added Wilson.