Why can’t a homebuyer get a subprime, interest-only, adjustable-rate or other “non-traditional” mortgages?
The intention of the Down Payment Assistance Program is to help households not only become homeowners but also remain homeowners. Generally, homeowners who receive “non-traditional” type of financing have a more difficult time sustaining homeownership than homeowners who receive prime loans. Subprime loans may charge a higher interest rate and higher fees that will require the homeowner to make a higher monthly payment than a prime loan. Interest-only loans may lower a homeowner’s monthly payments but will limit the amount of equity a homeowner can gain over time because the principal loan amount is not being reduced. Adjustable-rate mortgages may cause the homeowner’s monthly payments to increase over time, with the potential for those payments to be more than a household can handle.
