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Jumbo mortgage
This is considered a nonconforming loan because it exceeds the loan limit set by Fannie Mae and Freddie Mac, the two publicly chartered corporations that buy mortgage loans from lenders, thereby ensuring that mortgage money is available at all times in all locations around the country. The 2003 single-family loan limit is $322,700. The maximum loan amount is 50 percent higher in Alaska, Hawaii and the U.S. Virgin Islands. If you need to borrow more than that, you will need a jumbo mortgage, which generally has a higher interest rate than "conforming" loans.
Pro: Opportunity to purchase larger, more expensive home.
Con: Pay a higher interest rate in exchange for the lender's higher risk
Two-step mortgages
These are mortgages that combine elements of fixed and adjustable-rate mortgages. They go by confusing names such as 2/28, 5/25 or 7/23. A two-step mortgage features a fixed rate and payment for an initial period, followed by one adjustment, then a fixed rate and payment for the remainder of the loan term. A 7/23, for example, has an initial fixed period of seven years, an adjustment, and then 23 more years of payments following the adjustment.
Pro: Opportunity for damaged-credit borrowers to buy homes and to establish better credit.
Con: If your credit does not improve, you could be stuck in a high-rate loan for much longer than two or three years
http://www.bankrate.com/brm/green/mtg/mort1g.asp#jumbo |
