It is no secret that the housing market has been on fire lately, and the California mortgage remains one of the most popular on the market. The real estate market in California has been one of the hottest, if not the hottest, in the entire nation, and skyrocketing home values have led to a number of unconventional mortgages needed to allow average buyers to afford these ever increasing home prices.

The California mortgage market has been home to such loans as interest only loans, balloon payment loans, no down payment loans and a number of other types loans, in addition to the traditional 15 and 30 year fixed rate mortgages.

For those entering the California mortgage market, it is important to understand just what each of these unconventional mortgages entails. The popular interest only loan, for instance, has become one of the most popular mortgages in the California mortgage market, accounting for up to 50% of new mortgage loans.

While a California mortgage loan of this type can be great at allowing buyers who are otherwise unqualified to get a mortgage, they do carry certain risks, especially if housing prices were to stagnate or fall. While it is unusual for housing prices to decline, it does happen, and the California mortgage market experienced just such a drop a few decades ago.

When a homeowner takes out a California mortgage loan with the interest only option, he or she pays only the interest portion of the payment for a set number of years, generally three to five years. During that time no equity is being built up and no principal is being paid (unless the homeowner chooses to make an additional payment each month). At the end of this initial period, the California mortgage interest only loan reverts to a traditional variable rate mortgage loan, and at that time both principal and interest must be paid every month.

The idea, of course is that by the time the initial period of the California mortgage loan expires, the home will be worth much more, and the homeowner can simply refinance at more favorable rates and continue to enjoy low mortgage payments. While this is easy in a rising home price environment, it becomes a bit trickier when prices are not rising quickly.

No matter what type of California mortgage you choose, it is important to do your homework and to understand all the real estate jargon you will likely be hearing. A home is a major investment, after all, and the California mortgage should not be entered lightly. Do your homework, shop around and then enjoy your new home.