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Jumbo Refinance Mortgage Loans Can Be Approved If You're Prepared
You are thinking of a jumbo loan for a home refinance while rates are low but you have been told, "Do not to waste your time applying. Not now, since the banks aren't lending!" Most banks aren't too interested in approving jumbo loans. The jumbo loans are thought high risk loan, especially in a stagnant economy. Some banks may offer jumbo loans however their underwriting process is so strict that getting the jumbo loan towards the closing table is impossible. There are a few banks that handle jumbo loan efficiently and can hold these financing options in their portfolio. Finding this kind of bank could be the first step in your mission to have your jumbo loan refinanced. The right bank will have the widest variety of terms and also have the most flexible underwriting guidelines. There are more points that should be considered when choosing the right bank.
Despite the inherent risks resulting from higher loans, the basics of mortgage loan underwriting still apply. Like mortgage loans with amounts below $417,000, the 5 Cs of lending remain intact, (capacity, credit, capital, collateral, character.) So what's different with jumbo loan underwriting?
A residential jumbo loan is any home mortgage loan in which the loan size exceeds GSE's (Government Sponsored Enterprise such as Fannie Mae and Freddie Mac) limits. Currently, the GSE's loan limits are capped at $417,000.00 or $625,500 in Alaska or Hawaii. Any home loan exceeding these limits is considered a jumbo loan. This really is of course the first obvious distinction between a standard mortgage and the jumbo loan. With higher loans comes a lesser LTV (loan to value) Expect to have a minimum of a 20% equity position on a rate/term refinance.
The borrowed funds terms will vary from lender to lender and it is always prudent to look for a lender that has a variety of options that may be tailored for your specific needs, whether you need a Thirty year fixed interest rate, a 15 year fixed interest rate or perhaps a 5/1, 7/1 or 10/1 hybrid ARM or interest only. The eye rates on these higher loans are not as high as some borrowers think they would be. They often are a little bit higher than conventional mortgage rates and perhaps they may be lower than some conventional loans after their rate adjustments.
Many borrowers have unique situations and the bank that you ought to use is one that has a clear understanding of the distinctiveness of the higher loan borrower. For instance, although many borrowers possess a standard salary and W2 income, there's a disproportionate number when compared to lower amount borrowed applicants which have a W2 income that include bonuses or commissions. With the higher loan values, there's also a larger quantity of self employed borrowers and professionals. Different calculations ought to be used for this kind of borrower to match depreciation, depletion, bonuses and commissions. For any borrower's best shot at loan approval and efficiency, the larger loans need a bank that has a staff of underwriters and originators who've a greater set of skills and training for this type of mortgage origination and underwriting.
In order to be approved for a jumbo loan, you have to be prepared with support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In a nutshell, you'll need two years tax statements with all schedules, one month's newest pay stubs, two months most recent bank statements, schedule of real estate owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who's accustomed to this kind of loan will give you insight on which documents you need for the application.
