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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've been told, "Do not to waste your time applying. Not now, because the banks aren't lending!" Most banks aren't too interested in approving jumbo loans. The jumbo loans are thought a higher risk loan, especially in a stagnant economy. Some banks may offer jumbo loans but their underwriting process is really strict that obtaining the jumbo loan to the closing table is impossible. There are some banks that handle jumbo loan efficiently and can hold these loans in their portfolio. Finding this type of bank may be the initial step in your quest to have your jumbo loan refinanced. The best bank may have the widest array of terms and have the most flexible underwriting guidelines. There are more points that needs to be considered in choosing the right bank.
Regardless of the inherent risks posed by higher loans, the fundamentals of mortgage loan underwriting still apply. Like home 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 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 limited to $417,000.00 or $625,500 in Alaska or Hawaii. Any mortgage loan exceeding these limits is considered a jumbo loan. This is of course the first obvious distinction between a standard mortgage and the jumbo loan. With higher loans comes a lower LTV (loan to value) Have a much at least a 20% equity position on a rate/term refinance.
The borrowed funds terms will be different from lender to lender and it's always prudent to look for a lender which has a variety of options that may be tailored for your particular needs, whether you need a 30 year fixed interest rate, a 15 year fixed interest rate or a 5/1, 7/1 or 10/1 hybrid ARM or interest only. The interest rates on these higher loan amounts aren't up to some borrowers think they would be. They often are a tiny bit greater than conventional home loan rates and perhaps they may be less than some conventional loans after their rate adjustments.
Many borrowers have unique situations and the bank that you ought to turn to is a which has a clear understanding of the distinctiveness of the higher loan borrower. For example, although many borrowers have a standard salary and W2 income, there are a disproportionate number when compared to lower loan amount applicants that have a W2 income which include bonuses or commissions. With the higher loan values, there's also a larger number of self employed borrowers and professionals. Different calculations should be employed for this kind of borrower to allow for depreciation, depletion, bonuses and commissions. For any borrower's best shot at loan approval and efficiency, the higher loan amounts need a bank that has a staff of underwriters and originators who have a higher set of skills and proper training for this type of mortgage origination and underwriting.
In order to be approved for any jumbo loan, you have to bring along support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In short, you will need 2 yrs tax statements with all schedules, one month's newest pay stubs, 8 weeks most recent bank statements, schedule of real estate owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who is familiar with this kind of loan will give you insight on what documents you'll need for your application.
