Question 1

What happens when the interest-only period ends?

Accepted Answer

Your payment jumps 30-40% as you start paying principal. Most borrowers refinance before this happens, but you need equity and qualifying income to do so.

Question 2

Can I get an interest-only loan on my primary residence in Clayton?

Accepted Answer

Yes, but lenders scrutinize primary residence IO loans heavily. You'll need strong financials and a credible plan for handling the eventual payment increase.

Question 3

How much down payment do I need for an IO loan?

Accepted Answer

Expect 20-30% down minimum. Higher loan amounts or weaker credit push you toward 30%. Investment properties typically require 25-30% regardless of profile.

Question 4

Are interest-only loans riskier than regular mortgages?

Accepted Answer

They carry more risk if you lack a strategy. You build no equity during IO period, and payment shock hits hard when principal starts.

Question 5

What credit score do I need for an interest-only loan?

Accepted Answer

Most lenders want 680 minimum, but 720+ gets you better rates. These are non-QM products, so underwriting is more flexible than conventional loans.

Interest-Only Loans in Clayton: Strategic Financing for Contra Costa Homeowners