i want to get some feedback on how to avoid misusing interest only programs. this will help with my due diligence in analyzing cash flow deals.

thanks in advance

I don't fully understand the question but to my knowledge I don't think one can misuse an I/O program. The only downside of the I/O is when it becomes an adjustable. It's best to have a plan or strategy in place and then decide if you're going to go with a 2, 3, or 5 year I/O before it becomes an adjustable.

i meant if you were using an interest only program and paid some of the principal down, would this be irrelevant?

im looking for stories where interest only programs were not properly used.

interest only becomes a problem when the borrower would not qualify with a straight am. many brokers have put sub-prime clients into 2/28 I/O just to fit the debt ratio.

we have been using the 50/30 programs to combat the home prices in our area.

Alvin, give me a call when you get a chance.

_________________________________________

James Keely
Director Of Operations
Florida Mutual Mortgage
http://www.zerodownflorida.com

i think James hit it on the head. i've seen sub prime clients who have a real life DTI of around 65% but they fit em into an IO Stated product just barely under 50% DTI.

well, they're still at 65% no matter what the 1003 says. i know i get unfomfortable if my DTI goes above 30%, so i don't see how some people do it apart from equity stripping.

using IO as a means to conserve cashflow is great. using IO to meet a DTI requirement sucks, and is a fast track to being broke.