There are many different sorts or kinds of mortgage loans that you might avail, depending on your need and depending on your capacity to pay. The different kinds of mortgage loans and laws that apply differ not just in rates and period of payment but also within the states one who would like to apply is located. There are some types of mortgages that are available in one state that are not available in other states. Some of the mortgage loans are common in some states but differ in some of the laws that apply.
Common Forms of Mortgage Loans
As mentioned above there are different mortgage loan options available. However, there are just few of these types of loans that are common to many of the states. Among these are fixed-rate mortgage loans, adjustable rate mortgage loans, refinancing mortgage loans, and jumbo mortgage loans.
Fixed Rate Mortgage Loans
Fixed-rate mortgage loans come in different rates in different periods of payments depending on your agreement with the lender. In this type of loan, the borrower is assured of the arrangement of the rate he or she has to pay for a particular period of time. This would be beneficial when rates in the market would start fluctuating. It is because there is an assurance that whenever the rates in the market increase or decrease the rates you pay will not be affected. There would be neither increase nor decrease in the amount you are paying when changes happen in the market.
Adjustable Rate Mortgage Loans
Another type of a loan that is commonly applied for by the borrowers is the adjustable rate mortgage or ARM loan. In this type of loan, there is a bigger risk that is taken by the borrower. The basis of the adjustments of the rates here is the changes of the rates in the market. Whenever the rates suddenly increases the borrower has to pay higher rates, however, when the rates suddenly falls, it would be beneficial to the borrower because he or she ha to pay lower rates by then.
Refinancing Mortgage Loans
There is also another type of loan that is called the refinancing mortgage loan. This type of loan has a different set of loan rules, mode of payment, and rates after applying and paying for a previous loan. Refinancing loans allow the borrower to restructure their outstanding debt into a different format. An example would be changing from an adjustable rate mortgage to a fixed-rate mortgage loan. However, for processing refinancing loans, there are some other fees that would be incurred. These fees are taken for the appraisal of the property, the payment for legal procedures, processing and administrative fees. There are some companies on the other hand that wave these payments and add them to the principal amount you are going to pay. However there is a possibility that these companies compensate the payments by adding up higher interests in the new loan, in which you have applied.
Jumbo Mortgage Loans
There are agencies in the United States which purchase large amounts and bulks of the residential mortgages in the country. The biggest of these agencies which are sponsored by the government are the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These agencies are known as Fannie Mae and Freddie Mac. They are the agencies that sets and determines the limits of the value of the property the will purchase from a lender. However, there are those properties which are not covered up by the limits set through the full loan amount. When this happens, a jumbo mortgage loan is suggested. The usual limit in contiguous states is $417,000; for Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the national conforming loan limit is $625,000. Interest rates for jumbo mortgage loan are relatively higher compared to other conforming loans. This is for the reason that there is a huge risk that the lender takes when they allow people to borrow a huge amount for high-end properties that is most probably amounting from $417,000 to more than $700,000. You have options of taking a fixed interest rate or having adjustable rates in paying for the loan. However, lenders would usually require bigger amount for down payment so the principal amount you have to pay is a bit to lessen the risk on their part. Furthermore, usual amounts of interest rates for jumbo loans are about 0.875% higher compared to the other conforming loans.
Higher interest rates set on jumbo loans compared to other conforming loans is expected because there is much risk for lenders in this case. It is harder to find people who would refinance jumbo housing loan rates. And when cases of foreclosure happen, the lender has the burden of finding people who would like to refinance for it. There is much costs also needed for the repairs of such. This is also one reason that lenders would just allow extensions on borrowers and refinancers to avoid incurring more costs.
Types of Jumbo Mortgage Loans
There are certain types of jumbo mortgage loans also. These types were categories of amounts of the mortgage loans that are provided.
Jumbo Loans/Conforming Jumbo Loans
These are loans for the residential properties that amounts from the $417,000 to $729,750.
Non-Conforming Jumbo Loans
These loans are granted in areas wherein the loans are above $417,000 for average markets; amounts more than $729,750 for high cost markets such as Los Angeles, New York, etc. and for those areas such as Guam, Alaska, Hawaii and U.S. Virgin Islands wherein rates in the market is more than $938,250.
Super Jumbo Loans
These loans are those loans which amount from $1 million to $10 million.
Jumbo Loan Refinance
This kind of loan is a kind of loan taken advantage of by many low jumbo rate mortgage borrowers. This enables borrowers to replace an existing jumbo loan then modify the loan and the terms of the jumbo mortgage. This also gives a benefit to borrowers by allowing borrowers to take out cash from the refinancing loan.
When to Refinance into a Jumbo Mortgage Loan
When you have finally decided to settle down in a house or to refinance a house, you would have to check carefully and properly the rates in the market. But before that you have to set the amount of the house you would like to purchase. If you intend to live in a high-end, elegant type of house, check its amount and your capacity to pay for such. Check the available loans offered in your state and the rules and laws that apply. You have to make sure that as you choose a house you would be able to pay for it and the interest rates that come with it within the time duration that is set by the lender.
There are moments when the market prices for residential properties are low, that would be a very good time for you to connect with a lending company so you could apply for a loan and purchase your desired house. However, you must also take into consideration the fluctuating rates in the market before taking that chance, because that chance might turn into a bigger risk. See to it that the market rates are stable first before deciding to purchase a house. There are certain factors that would affect the rates in the market. You must be wise in checking these factors. Among these factors could be the cost of living within the state the house you are intending to buy is located, the prices of the commodities within that area, its climate, its crime rates, its employment rates, its tourism, etc. Thus, there are lots of factors that you have to check that may affect the rates of the residential properties within the state you are intending to live in.
Jumbo Loan Rates
When you have taken all those considerations, consider also the type of jumbo mortgage loan you would take and consider in which company you would like to lend the money you are to use in purchasing your house. Consider the rates of the mortgage that the companies offer. Take a survey and inquiries regarding services, rules, laws, agreements, etc. before you sign up for any papers. There are different kinds of terms that lenders offer too, so you must consider them too. Below are some of these:
Five Year Jumbo Rates
The first part of the five years would be a fixed-rate. You are to pay the interest in the first part and in the latter part you will pay the monthly bills depending on the principal amount of the property. The said bills would be higher but they could be adjustable depending on your agreement with the lender.
Seven Year Jumbo Rates
The said terms in this kind of loan is almost the same with the five year rates, however rates could be higher, yet they could still be adjustable. Thus, there is a must to check your savings whether you would be able to pay the monthly bills this kind of loan incurs or just take those of the longer period of paying yet the monthly bills would be a bit lesser.
Ten Year Jumbo Rates
There is much higher risk in taking this kind of loan, though payments could still be adjustable. However, by choosing this the rates you are paying when summed up would be significantly be lower than that of those rates for 30 year rates.
15 Year Jumbo Rates
The fixed rates in a 15 year period of this loan allow the borrower to handle its bills and have lesser burdens in paying bill monthly. There is also a security provided as they choose this fixed-rate loan.
30 Year Jumbo Rates
The thirty year period of payment of fixed rates in this loan provides security for the borrower. This kind of loan rates also makes the monthly bills very affordable and low cost for the borrower.
Always consider what would be beneficial for you in paying the rates before deciding. The house you might have chosen could really be the one you are dreaming of, however when you can’t pay it, it is gone.