Jumbo Loan
Purchasing almost any home in the Silicon Valley, Ca area usually requires that you will have to take out a Jumbo mortgage, also known as a “non-conforming loan." These loans are for homebuyers seeking to finance a mortgage in excess of $417,000.

With a jumbo mortgage you will generally have to come up with a slightly higher down payment than with a traditional loan, as jumbos are considered more risky by lenders than conforming loans. These loans are available in 30, 40 or 50 year amortizations, or as interest only loans. This gives you a longer period of time to pay off the loan, or to defer paying the interest, depending on which type of loan you have. Most jumbos come with variable interest rates, making the initial payments easy to handle; however, an interest rate increase may result in a large additional monthly payment. Closing costs for a jumbo are also higher than those of a conforming loan.

Fixed Rate Mortgage
The most traditional mortgage is a a fixed rate loan. This mortgage ensures that your payment will remain the same every month for the duration of the loan. Fixed mortgages are generally available in 15, 20 and 30 year terms. It is a good choice if you think that interest rates will increase during the life of your loan.

Adjustable Rate Mortgage
As the name suggests, adjustable rate mortgage payments change over time. At the beginning of the loan, you will generally pay a very low interest rate, lower than fixed rate loans. However, the interest rate is tied to an economic factor and will change at designated time periods. This change is usually an increase in payments, although decreases are possible. An ARM is often taken out by homebuyers who are looking for low initial payments and plan to live in the home for 10 years or less. If you are willing to ride the changing interest rate, an adjustable rate mortgage may be the right choice for you.

Interest Only Loan
If you expect your income to increase during the duration of your mortgage, an Interest Only loan may be the best choice. With interest only loans, you start out with a low monthly payment, since you are not paying the principle of the loan. There is a designated period for the interest-only payment; once that period expires you will be responsible for principle plus interest, which will be a significant increase over your previous payments. Make sure your interest only loan has no prepayment penalty so that you can begin to make principle payments at any time. Interest only loans are wise choices for people who want to use the money they are saving to diversify their investment portfolios or who plan to refinance a few years down the road.

Home Equity Line of Credit
Although this is not a mortgage which allows you to purchase a residence, a line of credit allows you to borrow against the equity in your home. The money can be used as you wish, whether it’s to build a home addition, fund major repairs or send your child to college. The interest on these loans is much lower than that of credit card loans and you may be able to deduct the interest on your taxes. It is a good idea to check with your tax advisor before taking this, or any loan.


No-Doc loan
“Doc” is short for document and, when you take out a no doc loan, you avoid having to compile the paperwork needed for traditional mortgages. You don’t need to document your assets or income; simply declare your income and provide a social security number. The lender makes the decision based on that information and your credit score.

As you might expect, no-docs carry higher interest rates than conventional mortgages. To qualify you must have an excellent credit score.

No-docs are a good alternative for:

• Someone whose income is difficult to document
• Those who can’t show two consecutive years of employment
• A person living off an inheritance
• Anyone who has a complex financial situation

Balloon Mortgage

Balloon mortgages have very short terms, usually 5 to 7 years, but your monthly payment is based on a 30 year amortization. At the end of the mortgage term, you are responsible for the outstanding balance, so you must be prepared to pay off the loan, sell your home or refinance.

Advantages of balloon mortgages are that they generally carry a lower interest rate than a fixed or an ARM and you may have an easier time qualifying for a balloon than for the other two.

If you would like more information about the types of available mortgages, or would like us to refer you to one of our trusted lenders, please contact The SV Home Team.