With home prices still near record highs in many parts of the country, jumbo mortgages -- loans for more than $417,000 -- are almost common.

But you need to ask yourself some very hard questions before borrowing that kind of money.

Can you realistically afford to pay $3,000 or more, month after month? Do you have enough savings to keep up with the payments if you get seriously ill or lose your job? If you get a jumbo loan, what else will you be able to afford?

Only you know what your actual cost of living is, what your priorities are, and how much of your income you are willing and actually able to dedicate to making mortgage payments -- even if a lender is willing to give you more.

We buy houses to live in, not to be trapped in because we can't afford to do anything but make our monthly payments.

The key is to find a loan you can live with, even if it means buying a less expensive house that requires you to borrow a more affordable amount.

Like smaller loans, jumbos come in fixed-rate, interest-only and adjustable-rate varieties. But there's one thing you can count on: You'll pay a higher interest rate than on a conventional loan.

"Typically, you pay about a quarter of a point more (for a jumbo loan)," explains Tim Kruger, senior vice president for Private Mortgage Banking Group, in Sherman Oaks, Calif. Depending upon your credit history and other factors, you might have to pay a lot more.

"The mortgage business is one of the few where the more product you buy, the higher the price goes,"explains Tim Kruger, senior vice president for Private Mortgage Banking Group, in Sherman Oaks, Calif. "Depending upon your credit history and other factors, you might have to pay a lot more. The reason is that lenders interpret this as an increased level of risk." The higher the risk, the higher the rate.

In addition, with the current credit crisis in the mortgage market, it is more difficult to find an investor for a jumbo loan. So the interest rate on those loans have been rising more rapidly than those on conventional loans.

And no matter what type of jumbo loan you choose, you need to focus on your own risks, because when you are looking at a jumbo loan, the risks are big. Just consider the size of the monthly payment.

A 30-year, fixed-rate mortgage for $420,000 at 7.20% -- the present average rate available for a jumbo 30-year loan according to our most recent survey-- translates into a basic monthly payment of $2851 and total interest payments of more than $600,000 over the life of the loan.

That just covers principal and interest and does not include property taxes, insurance or fees and assessments, which can add hundreds of dollars to your total. If you don't have a good credit score, a down payment of at least 5%, and the right balance of income to debt, you could end up paying even more.

A 15-year fixed jumbo can save you a lot of money. The interest rate is lower; probably somewhere around 6.85% and a 15-year mortgage for $420,000 would save you more than $352,000 in total interest. But, you'd have to pay a whopping $3,740 a month.

Jumbo loans can also run for 40- and 50-years -- not something we recommend for any mortgage

The extra years will add another quarter of a percentage point to the interest rate, taking it up to 7.625% or higher. Your monthly payments will be smaller -- $2,804 for 40 years and $2,730 for 50 years -- but you'll pay down your debt, and build equity in your home, at an agonizingly slow rate.

At least with a fixed-rate loan you'll know what your monthly mortgage payment would be every month. With variable-rate mortgages, it's a guessing game.

ARMs and interest-only jumbo loans often come with a ridiculously cheap introductory rate that allows the salesman to entice you with lower payments than you can get with a fixed-rate loan.

But in just a year -- or even a month for the notoriously dangerous option ARMs -- your rates can begin climbing well beyond those charged by fixed-rate loans.

Interest-only loans are usually ARMs with an additional twist -- for the first two to 10 years you only pay the interest and none of the principal. That means your payments can increase even more dramatically when the rates go up and you have to start repaying your debt.

The additional costs can be truly breathtaking for jumbo loans -- always running into the hundreds and often into the thousands of dollars. Borrowers who aren't prepared for those resets can literally lose their house.

We're now seeing how many buyers gambled that their homes would appreciate quickly enough for them to sell at a profit, or allow them to refinance to a more affordable loan, before the payments became too costly.

But with home prices stagnating or falling across much of the country, they lost that bet. They can't keep up with rising payments and can't sell or refinance because they owe more than their homes are worth.

That's led to a growing number of foreclosures and reinforced the need to think long and hard about what such a huge loan might mean for you and your family.

By the editors of Interest.com

Have a question about your finances? Ask us at editors@interest.com.