What is a jumbo loan?
Jumbo Loans provide financing for luxury and high cost homes up to 5 million dollars. It is called a jumbo loan because it is higher than the conventional limits set by Fannie Mae and Freddie Mac.
Similar to conventional loans, jumbo loans can either be fixed or adjustable. The better option will depend on the length of time you plan to live in the home. Both jumbo fixed and adjustable rate mortgages require sufficient income and credit history to qualify.
Jumbo Fixed Rate Mortgage
With a fixed rate mortgage, your interest rate will stay the same for the duration of your loan. This means your monthly payment will remain the same for the length of the loan. You may be able to refinance if the market rate decreases. Jumbo fixed rate mortgages are available in a variety if term lengths, ranging from 10 to 30 years.
Jumbo Adjustable Rate Mortgages (ARM)
There is a bit more risk involved with an adjustable rate mortgage. However, it is possible to save money on an ARM during the adjustment periods. It is also possible to have your payment increase during this time. An ARM will look like this, 3/1, 5/1 or 10/1. The first number tells you how many years your rate will be locked. The second number tells you how often your rate can be adjusted, in this case, ever year. You can set rate and payment limits, called caps. This means that during the adjustment periods, the rate can only increase a certain amount.
You must have sufficient income and credit history to qualify for a jumbo loan.
*Generally set at $548,250, though this figure may be higher depending on your state and county. Call for details.