Final answer:
Donna, a house flipper, may consider options like a zero-down home mortgage for no upfront payment, a teaser-rate ARM for lower initial payments, a traditional conventional mortgage for payment stability, or a no documentation home mortgage for quick funding despite higher risks. Therefore, the correct option is 1.
Step-by-step explanation:
Donna, who is in the business of flipping houses, might be interested in various types of mortgages. The nature of her business suggests that a zero-down home mortgage might be an attractive option because it requires no down payment, allowing for potential immediate equity upon repair and resale of the property. However, these types of mortgages often come with a catch, such as higher interest rates or the requirement of mortgage insurance that increases overall costs. Another potential mortgage is the teaser-rate ARM (adjustable-rate mortgage), where the initial interest rate is temporarily discounted, making payments initially lower. This could be beneficial for a flipper who plans to resell the house quickly before the rate increases. Nevertheless, if the flip takes longer than anticipated, Donna might face a significant increase in interest rates, thus increasing her carrying costs. While conventional mortgages require a down payment, they usually come with a fixed interest rate providing stability in payments. This could be a safer choice if Donna plans to hold on to the property longer than expected. A no documentation home mortgage could be appealing due to the ease and speed of funding, especially if income and assets are complex or if Donna runs a large-scale operation. Yet, these loans are considered risky and typically have higher interest rates.