Why can’t a homebuyer get subprime, interest-only, adjustable-rate or other “non-traditional” mortgages?
Generally, homeowners who received “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. Additionally, because homes purchased through the Community Housing Program receive limited appreciation during the Period of Affordability, loans that require higher payments and/or limit a homeowner’s equity will make it more difficult for a homeowner to gain financially from homeownership.
