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Jumbo Mortgages VS. Regular Mortgages

Nov 30, 2007
The purpose of this article is to help buyers know the difference between a jumbo mortgage and a regular mortgage. To make a proper comparison the buyer will need the following information.

First of all you can not receive a large amount on a regular mortgage. Regular mortgages are used for the more common property. This is for property that the buyers do not have to borrow exceedingly high amounts.

A regular mortgage loan usually has a fixed interest rate. This is good for first time buyers, because the buyer will always know what their monthly payment will be. This type of regular mortgage loan is called a fixed-rate mortgage.

Another type of regular mortgage is called an interest only fixed-rate mortgage. This is where for the first half of the mortgage the buyer will pay only on the interest. The second half the buyer will be paying on the interest and the principle. The interest rate is still fixed like the fixed-rate mortgage.

There is a down side to a fixed-rate mortgage, if the interest rate goes down on the market then your interest will not drop it will stay at the interest rate that it was set at when you settled your loan. The way to drop your interest would be to refinance your mortgage.

On a positive note if the interest rate on the market rises, the buyers mortgage will not be affected. This can also help a buyer to plan for the future. They will always know what their interest rate will be and give them security knowing that it will never raise on their mortgage.

A jumbo mortgage is great for those buyers who are purchasing a home that costs more then the average home. That is why it is called a jumbo mortgage. A jumbo mortgage is used when the loan amount is higher then the standards set by Fannie Mae and Freddie Mac.

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are the two largest secondary market lenders. They purchase loans from other individual lenders. If the loan exceeds their limit, then other investors such as insurance companies and banks cover the rest of the mortgage.

The interest rate on a jumbo mortgage is higher then the regular mortgage. There is more risk on a jumbo mortgage. The interest rate on a jumbo mortgage depends on the amount borrowed and the property taxes. Being based on these two things it can really raise the interest rate on the jumbo mortgage.

Now if a mortgage is to exceed $650,000 then it is called a super jumbo mortgage. This type of mortgage is used for the million dollar homes or even 2 million dollar homes.

To summaries a regular mortgage is for those who would like to have a fixed or lower interest rate, giving them the same monthly payment for the life of their mortgage. This type of loan is used for the average property. This is great for first time buyers.

A jumbo loan is for those purchasing property between $400,000 and $600,000. The interest rate is usually based on the property taxes and the amount of the mortgage. A jumbo loan has a high risk attached to it.
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