Due to the housing crisis, a lot of creative financing options have become unavailable. Right now, it’s pretty much impossible to take out a zero-down traditional loan or NINA (no-income-no-asset) mortgage. However, some homeowners who don’t have the documented income to qualify for a 30-year loan have found a solution: the 4o-year mortgage.

By adding an additional 10-years to their home loans, more creative financers are able to make the cut.

BankingMyWay reports:

“Despite their drawbacks, 40-year mortgages can be a helpful home-buying tool for those who use them wisely. A professional just starting out in her career, for example, may be able to get into a slightly pricier home using a 40-year mortgage. As her income grows, she can refinance into a mortgage product that allows equity to grow more rapidly.

The danger with using a 40-year mortgage to stretch buying power is getting into a more expensive home than you can truly afford. If the housing crisis has proved nothing else, it’s the lesson that just because you can get a mortgage for a home doesn’t mean you should. If housing prices continue to fall and you are stuck holding the bag on a 40-year mortgage with no equity, the next home foreclosure could be yours.”

It’s important to keep in mind that most 40-year mortgages have higher interest rates than 30-year loans. This certainly isn’t the right choice for everyone, but is a possibility that allows some borrowers to qualify in this tight market.

See Also:

FHA Mortgage Guide

Tags | 40-year mortgage, creative financing