Can Southern California Residents Afford Mortgage Loan Payments for Million Dollar Homes?
By: Maria Nyce

Any loan amount above these conforming loan limits is considered a jumbo mortgage, and any amount over $650,000 is considered a super jumbo loan. "Once again, although the new conforming loan limits will help some home buyers qualify for a lower-cost loan, they do not go far enough to benefit most home buyers in California," said Jim Hamilton, president of the real estate trade group. "Conforming loan limits need to more accurately reflect the cost of housing in California." So, how do Southern Californians afford those million dollar loans?

The 2006 Fannie Mae and Freddie Mac conforming loan amounts are:

No. of Units Contiguous 48 States, District of Columbia and Puerto Rico Alaska, Hawaii, Guam & U.S. Virgin Islands
1 $417,000 $625,500
2 $533,850 $800,755
3 $645,300 $967,950
4 $801,950 $1,202,925

Until the conforming limits reflect the California cost of living, Southern Californians have to rely on jumbo loans for their mortgages. Similar to conforming loans, there are many types of jumbo and super jumbo mortgages that help provide buyers with increased purchase power for those million dollar purchase loans and mortgage refinances. Some of them include:

· Negative Amortization Loans, also known as deferred interest, payment option ARM (adjustable rate mortgage), pick a payment mortgage, neg am loans and other similar titles, with such features as 1% intro rates, multiple payment options so people can make low payments for times they have less money and higher payments when they have more.

· 40-, or even 50-year amortization and interest only options that allow borrowers to pay back the loan over a longer period of time or to defray repayment of principal for a few years.

· And, for the more affluent that don’t need to worry about low payment options, there are also standard 30-year fixed rate loans and various adjustable rate mortgages where borrowers make fully indexed payments (principal and interest).

Unlike fixed-rate loans, interest rates on negative amortization loans and ARMs are based on CODI, MTA, COFI and other prime rate indices, which are subject to frequent changes. If you currently have a negative amortization or ARM, you may want to cash out on your equity by refinancing at a fixed rate to beat the next interest rate hike before your next interest rate adjustment.

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