Jumbo Loans

Loans which are larger than the conforming loans limits set by Fannie Mae and Freddie Mac are called jumbo loans. Because jumbo loans are not funded by these government sponsored entities, and are bought and sold on a much smaller scale, they usually carry a higher interest rate and some additional underwriting requirements. However, the interest rate spread between the two varies with the economy.

• Strengths: This program provides long-term rate security.
• Weaknesses: Rates are higher than even the 30 year fixed conforming, which makes this a very expensive mortgage compared to Jumbo ARM's.
• Comments: This is a good program for the security conscious and those with fears of rising rates, but not usually a good way to save money.

• Strengths: this program offers rate security for 15 years. Rates are often a ½% better than the 30 year. More of your payment goes to principal and less to interest. You build equity at twice the pace of a 30 year loan without making double the payment.
• Weaknesses: The borrower will qualify for a smaller loan amount than for 30 year amortized programs.
• Comments: If building equity is your goal and you would rather save money on interest than buy a more expensive home, the 15 year is the program for you.
  A strategy to lower your overall interest payments if your purchase or refinance balance is above $417,000 is to use a combination of both first and second trust money, referred to as an 80/10/10, 80/15/5 or 80/20, all of which are combination loans. Every situation is different, but it is one more option to consider.