| The cost of new housing in San Diego County has | | | | rate interest, then the loan converts and the interest |
| more than tripled during the last 10 years. The San | | | | rate rises or falls according to one of the banking |
| Diego Housing Commission reports the average price | | | | indexes, such as COFI, LIBOR or MTA. A built in |
| of a new home has jumped from almost $245,884 in | | | | margin is added to the index rate to determine the |
| 1996 to $861,759 in 2006. As property values in the | | | | interest rate. These loans usually have four payment |
| area reach the million dollar mark, prospective | | | | options each month, the standard 30-year or 15-year |
| homeowners face a new breed of loan...the jumbo or | | | | pay-off rate, the minimum payment option, and an |
| super jumbo mortgage. | | | | interest only option. |
| Jumbo and Super-Jumbo mortgages do not conform | | | | The homeowner chooses each month how much |
| to the Fannie Mae federal mortgage guidelines. Those | | | | payment they want to make. The minimum payment |
| guidelines limit the amount of mortgages at $417,000. | | | | option doesn't pay all of the principal or interest, and |
| Also known as non-conforming loans, these loans don't | | | | actually adds to the balance of the loan, known as |
| have to meet standard mortgage rules. | | | | negative amortization. Sounds scary to some people, |
| In an inflated housing market such as San Diego | | | | but if you make 5 years worth of minimum payments |
| County, some homeowners need options to keep the | | | | and your home's value triples, the equity could make |
| monthly mortgage payment low, while purchasing the | | | | up the difference. |
| home they need. | | | | Another option is the interest only loan. These loans |
| An $850,000 home financed using a standard 30-year | | | | allow homeowners to pay the interest amount only for |
| fixed rate mortgage, with 20% down, would come with | | | | a specified time period...then the loan converts to a fully |
| a monthly payment of more than $5,000. If the price | | | | amortized loan. Again, if the home's value increases, |
| seems high, the mortgage industry has some options | | | | the homeowner is in good shape. But if the home's |
| for prospective homeowners to keep payment lower. | | | | value doesn't jump high enough, they could face some |
| A payment option ARM has an initial period of fixed | | | | stiff payments when the loan converts. |