In addition to the traditional fixed rate mortgage and the adjustable rate mortgage we all know about, there are some other types of mortgage instruments that are not so well known. This article details a few of those less-than-traditional mortgage methods.
Jumbo mortgage: A jumbo is nearly always considered a non-conforming loan because it exceeds the loan limit set by Fannie Mae and Freddie Mac. These are the two publicly chartered corporations that buy mortgage loans from lenders. They do this to make sure that mortgage loan money is available at all times around the nation. You should know that the single-family limit benchmark changes yearly and if you need to borrow more than that amount, you will need a jumbo mortgage. A jumbo loan usually has a higher interest rate than traditional loans.
The advantage of a jumbo mortgage is it allows you to buy a more expensive house. The disadvantage is that you will normally pay a higher interest rate.
Two-step Mortgage: These are some mortgages that use certain elements of both the fixed rate and the adjustable-rate mortgage. They might be called 2/28, 5/25 or 7/23. A two-step mortgage allows for a fixed rate...
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