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COPYRIGHT 2005 The Dallas Morning News
Byline: Pamela Yip
Jul. 25--Not long ago, financing a home was like ordering from a menu with only one item: You got what was available, which was the plain-vanilla, 30-year fixed-rate mortgage.
But today, lenders are offering hundreds of mortgage products with creative terms. You can pay the interest only for a few years, choose your monthly payment or even close on your loan
with little documentation of your income.
The trick, experts say, is that these hot products can be time bombs for consumers who don't consider the long-term consequences of such easy credit.
"Mortgage programs now are not just one-size-fits-all," says Anthony Hsieh, president of LendingTree.com, an online lender. "Some people are stretching today because of the runaway housing prices."
You can thank technology for the smorgasbord of mortgages out in the market.
"Software has made it possible to maintain consumer protections and to instantaneously recalculate loan payments," says Doug Duncan, chief economist of the Mortgage Bankers Association. "It's allowed companies to make what used to be a paper-and-manual process an electronic process and dramatically lower the cost."
More sophisticated credit analysis plays a role, too, because lenders can more accurately judge their risks while still enticing borrowers with lower rates.
"There are so many more programs these days, it could be confusing to the consumer," Hsieh says. "The lower the monthly payment, you're giving up something else."
DO MATH BEFORE MORTGAGE
So you're ready to buy a home. Let's focus on first things first:
Be sure that you have a good overview of your financial health -- and don't think of your mortgage separately.
"It should be a part of a larger financial plan," says Doug Duncan, chief economist at the Mortgage Bankers Association....
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