Is no down payment for you (2)

There are even special courses that mortgage loan officers can spend
money on to learn how they work and how to present them to their
clients. Again, it can make for an impressive presentation and makes
the loan office appear to be more financially "savvy" than their
competitors.

I agree with the concept, but I couldn't disagree more with the
author's assertion that this program works for everybody, because two
key components of this mortgage strategy are:

1. No Money Down
2. Payment Option ARMs

Heard those terms lately? Lenders over the past couple of years have
pushed no money down loans as ways to get people into homes that
otherwise wouldn't qualify. Lenders also have pushed Payment Option
ARMs as a way to help people feel more comfortable with mortgage
payments each month.

As in 1 percent interest and negative amortization.

These books teach people to pay an interest-only payment or a low
"pay" rate of 1 percent or so instead of the fully-indexed payment
where part of the house payment goes to the principal and part goes to
interest. The difference between the interest only and a fully
amortized one should go to a mutual fund.

It works out okay if the stars are aligned correctly but sometimes
they aren't. As in right now. If people in fact put their money in a
liquid investment and if they get in trouble they can always tap into
that money to help out with bills and stuff.

But what if they don't have the discipline to do that each and every
month? And what if they have to pull some money out of their original
investment? Or worse, what if they never had an original investment in
the first place?

And what if they had to refinance to avoid a hybrid reset but couldn't
because ... (drum roll, please) ... there was no equity in the
property?

Using your mortgage as a financial planning tool is a good thing,
please don't get me wrong here. But this program is not for everybody
by any stretch. They're for those who follow the plan exactly. But for
those who can't, for whatever reason, could find themselves in some
trouble.