Reply #13: Misinformation [View All]

[DevilsAdvocate2]

I'm sorry, but i feel obligated to correct some misinformation contained in many of the posts related to this proposed program. First, borrowers are not required to file annual statements with a lender to keep the same interest rate. When you sign your mortgage note it specifically states the interest rate, term, and loan amount.

The reason lenders prefer a down payment when purchasing a house is not because it lowers the monthy payment, but because it decreases the chances of default because the borrower has a vested interest in the property. In addition, in the event of default the lender is more likely to recover the entire loan amount because they can sell the property at less than full market value and still recover their money. This is why you can often buy a foreclosed home cheaper than a market-priced home.

FHA does not offer variable rate loans. Once you sign the note, your rate is fixed. All costs must be disclosed per the Truth in Lending Act.

It is not wise to move into a house with $10 in the bank. However, if you have $5,000 for a down payment, it may be better to finance all closing costs and go zero down than to use all of your savings for your down payment. That way if you run into a rough spot you still have your $5,000 in the bank to fall back on.

As a mortgage lender, i feel this proposal sounds pretty good on the surface, except for the 2.25% discount points. I'll wait until i hear the specifics before i make a final determination.