Jumbo Loans: Your Key to Upscale California Living

Are you dreaming of residing in a luxurious Californian neighborhood? Surprisingly, the ticket price might begin at a cool $1 million. Jumbo home mortgages and ARMs (Adjustable Rate Mortgages) are becoming popular for many aspiring to the Californian high life. But what exactly are these mortgage options, and are they your golden ticket?

Jumbo vs. Conforming: Decoding The Terms

A “conforming” loan dances within the lines set by Fannie Mae and Freddie Mac, the dual giants are overseeing home loan purchases. Here’s the crux: if your desired loan exceeds $726,525 in some counties or over $484,350 in others, it steps outside these lines. Such loans are branded as “jumbo” or “non-conforming.” The major draw for conforming loans? They are backed by the big two (Fannie and Freddie), making them a safer bet for lenders.

How Big Can You Go with Jumbo Loans?

Well, the sky’s the limit! There’s no cap to the jumbo home mortgage amount you can seek. It’s feasible whether it’s $1 million or $10 million. And the cherry on top? You get to choose the repayment term that suits your financial plan, from a 15-year period to a conventional 30-year plan.

Setting Sail: Navigating the Jumbo Loan Waters

Securing a jumbo loan might require a tad more paperwork and might even venture into alternative documentation terrain. Here’s the silver lining, though: you can flexibly use bank statements, showcase assets in reserve, or even present other income documents. Fancy a combination of loan products? That’s on the table, too. The goal is clear: securing that dream house in that dream neighborhood.

Making the Right Jumbo Choice

An adjustable-rate mortgage, or ARM, tantalizes with lower initial interest rates. Consider the popular 5/1 Jumbo ARM. The choice depends on your financial strategy and long-term plans. Partnering with a seasoned mortgage broker can illuminate the path, presenting all the jumbo mortgage options at your disposal.

Are you aspiring to upscale living in California? A jumbo mortgage or a jumbo ARM might be your key. Understanding your options and aligning them with your financial trajectory ensures your Californian dream doesn’t remain just a dream.

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Can You Use an Interest Only ARM to Buy a Home And Achieve Financial Goals?

With fixed-rate 30-year mortgages at a relatively low rate, you may not be thinking about an adjustable rate mortgage (ARM) or an interest-only ARM. However, an interest only ARM could help you achieve your financial goals, including home ownership and investment.

How does an interest-only adjustable rate mortgage work?

With an interest-only ARM, you’ll get an initial loan period with set monthly interest-only payments. This initial period is usually around five years but can be shorter or longer.

If you have a $500,000 4% interest-only 5/1 ARM, your starting interest-only mortgage payment will be $1,667.00. Your payment will increase after 5 years in this type of mortgage. After 5 years, your payment will increase, reflecting a remaining 25 years of principal repayment and interest. Monthly ARM payments could increase to a potential maximum of $3,772.30 a month, assuming .25% annual interest increases with an interest rate cap of 12%.

Which type of financial and home buying circumstance can fit an interest-only adjustable rate mortgage?

Interest-only ARMS can be a good fit if you have a variable income and cash reserves. If you anticipate that your income will increase over time, you can also be a good fit for an interest-only ARM. Some interest-only ARMs will also allow you to make principal payments besides the interest-only payments during the first years of the mortgage.

Do you plan to stay in the home a short time and are you confident you can sell it without taking a large loss? This is another financial situation that could be a good fit for an interest-only ARM.

If you have enough income to easily cover the mortgage payment when the mortgage adjusts and includes principal and interest payments, and you’re disciplined about your finances, you can invest the principal you would have paid into your mortgage, and keep the difference when your mortgage adjusts.

There’s one scenario that isn’t the best fit for an interest-only ARM. If you can only buy a home based on an interest-only loan, this mortgage is probably not a smart financial decision.

Work with a qualified, experienced mortgage expert to learn if an interest-only ARM is a good financial choice.

Sources

https://www.nerdwallet.com/blog/mortgages/interest-only-mortgages-what-you-need-to-know/

https://www.mortgagecalculator.org/calcs/io-arm.php

California Platinum Loans

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Is There A Current Program That Will Quickly Enable Us To Buy a Bigger, Better Home? Is an Adjustable Rate Mortgage a Smart And A Safe Solution At This Moment?

Mortgage interest rates have been declining for a while now, so you may not even think about an adjustable-rate mortgage (ARM). There are a few reasons an ARM might make good sense for you financially even with today’s low 30-year fixed mortgage interest rates. ARM interest rates can be up to half a percentage point (or more) lower than a fixed-rate mortgage, especially when it comes to Jumbo ARMs and Super Jumbo ARMs. In high housing cost markets like Los Angeles and Orange County, along with many other high-cost counties in the State of California, a half-point difference in mortgage interest rate could help you to buy a bigger, better house.

What are the advantages of an Adjustable Rate Mortgage (ARM)?

As long as ARMs offer lower interest rates than fixed-rate 30-year mortgages, you may be able to qualify for a larger loan and therefore, a bigger, better house.

For example, if you wanted to buy a $1 million home, put 20% down, and apply for a 5/1 ARM at 3.35% interest, your monthly payments (excluding taxes and insurance) would be about $3,540. At 3.99% interest and a fixed-rate 30-year mortgage, your monthly principal and interest payments would be more than $3,800.

If there is no difference in interest rate between a 30-year fixed-rate mortgage and a 5/1 ARM, then the ARM won’t help you to qualify for a higher loan amount and a bigger house.

What are some pitfalls of an ARM?

ARMs come with different terms. Common ARM terms are 3/1, 5/1, 7/1, and even 10/1. The first number indicates the number of years you’ll have your initial interest rate locked in. So, a 5/1 ARM will have the same interest rate and monthly payment for five years. The second number indicates how often the rate can change after the initial rate period. You’ll notice all the common ARMs can have their interest rate change every year after the initial fixed-rate term. By “change”, you’re right — the biggest pitfall with an ARM is the potential for the interest rate, and monthly payment, to go up every year after the initial fixed-rate term.  Watch our short video clip below that explains the 3 Reasons why you should consider an Adjustable Rate Mortgage.

If you’re interested in an ARM so you can buy the home you want, and save on the compounding effect of interest, you should work with an experienced mortgage professional to locate an ARM that has terms you can understand and live with. ARMs can have caps on the amount their interest rate can go up when the fixed-rate term ends. They can also have a cap on the total interest rate increase over the lifetime of the loan.

Sources

https://www.realtor.com/advice/finance/i-got-an-adjustable-rate-mortgage/

https://www.nerdwallet.com/blog/mortgages/pros-cons-adjustable-rate-mortgages/

https://www.cnbc.com/2019/08/23/why-you-might-want-to-rethink-getting-an-adjustable-rate-mortgage.html

https://www.mortgagecalculator.org/calcs/5-1-arm.php

California Platinum Loans

  https://californiaplatinumloans.com