or a property to be considered a jumbo purchase, the price of the property or the value of the loan will be greater than $417,000. Jumbo loans are used for purchases such as this because they provide home buyers with flexibility in their purchase and payment options. A jumbo loan is a conventional loan, but it is considered non-conforming. It is referred to as non-conforming because their loan limits are outside those of conforming, conventional loans. There are several types of jumbo loans available to home buyers, and the type of jumbo loan they choose will be based on their needs and individual financial circumstances. The most common types of jumbo loans for which home buyers apply include: fixed rate jumbo loans, interest only jumbo loans, adjustable rate jumbo loans, and no doc/stated income jumbo loans.
Fixed Rate Jumbo Loans
Home buyers making a jumbo purchase can opt for a fixed rate jumbo loan for a term of 15 to 30 years. As with other fixed rate loans, the interest rate will not change over the life of the loan. While a home buyers overall mortgage could fluctuate due to various factors, the payment will not fluctuate due to changes in interest rates. Jumbo fixed rate loans are ideal for those home buyers that intend to live in the home for a long period of time without refinancing.
Interest Only Jumbo Loans
With an interest only jumbo loan, the payments that home buyers make on these loans will be to only pay the interest on the loan. These types of loans are available for various terms. At the end of the loan term, home buyers will have the option of paying the principal amount, converting the loan, or entering into an interest only mortgage. The advantage of using an interest only jumbo loan is due to the loan's low monthly payments.
Adjustable Rate Jumbo Loans
Adjustable rate jumbo loans are also referred to as hybrid loans. These types of loans will have a fixed rate for a term of 6 months to 10 years. At the end of this term, the interest rate will become adjustable. Jumbo adjustable rate loans help to help to keep monthly mortgage payments low. These loans may be ideal for home buyers that intend to occupy the home for a short period of time or refinance in the future.
No Doc/Stated Income Jumbo Loans
These high risk loans usually have a higher mortgage rate because home buyers do not verify their income with this type of loan. Home buyers that utilize these types of loans are typically self-employed individuals or individuals with complicated tax returns. When individuals prefer not to provide financial documentation in order to qualify for a home loan, this type of loan may be an option.
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