As a real estate broker, I see that a lot of my buyers are getting homes with INTEREST ONLY payments. Although it is explained to them what this means, a lot of them come back months later to have me explain why their mortgage balance isn't going down and ask if they can refinance to get a lower "payment."
Well, interest only is a great investment loan vehicle if you know how to use. But it is a sure path to becoming a "mortgage nightmare" if not understood.
For a lot us, Latino or not, we want to own our home free and clear eventually. But after a great sales job by lenders, the Latino buyer accepts an interest, prepayment penalty, variable loan and never really understands it implications. On the other hand, without these loans a typical (latino) home buyer will not qualify. So it comes down to being practical and realistic in terms of homeownership.
So set up your priorities, and if the overriding goal is to own your home then often the comprise is an interest only loan in order to have the minimum mortgage payment. This is especially true in the San Francisco Bay Area. But a buyer also has to under that that the principal will not go down, and that most likely when she refinances the then current rates will be higher.
So a buyer should look at the worst case scenario: WHAT IS THE MAXIMUM INTEREST RATE THE MY LOAN CAN HAVE(the caps), and see if they can still afford the mortgage, or would be willing to consider selling options.
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