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Jumbo Refinance Mortgage Loans Could be Approved If you are Prepared
You are considering a jumbo loan for any home refinance while rates are low but you have 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 high risk loan, especially in a stagnant economy. Some banks may offer jumbo loans however their underwriting process is so strict that obtaining the jumbo loan towards the closing table doesn't seem possible. There are some banks that handle jumbo loan efficiently and can hold these loans in their portfolio. Finding this type of bank could be the first step inside your mission to have your jumbo loan refinanced. The right bank may have the widest array of terms and also have the most flexible underwriting guidelines. There are other points that should be considered in choosing the right bank.
Regardless of the inherent risks resulting from higher loan amounts, the fundamentals of home loan underwriting still apply. Like mortgage loans with amounts below $417,000, the five 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 for example 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 mortgage loan exceeding these limits is recognized as a jumbo loan. This is obviously the first obvious distinction between a standard home mortgage and also the jumbo loan. With higher loans comes a lower LTV (loan to value) Expect to have a minimum of a 20% equity position on the rate/term refinance.
The loan terms will be different between various lenders and it's always prudent to consider a lender which has a variety of options that can be tailored for your specific needs, whether you'll need a Thirty year fixed rate, a 15 year fixed interest rate or perhaps 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 generally are a little 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 also the bank that you ought to use is one which has a clear knowledge of the uniqueness of the higher loan borrower. For instance, although many borrowers possess a standard salary and W2 income, there are a disproportionate number in comparison with lower amount borrowed applicants which have a W2 income which include bonuses or commissions. With the higher loan values, there's also a bigger number of self-employed borrowers and professionals. Different calculations should 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 loan amounts need a bank that has a staff of underwriters and originators who've a greater skill set and proper training with this type of mortgage origination and underwriting.
In order to be approved for a jumbo loan, you have to bring along support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In short, you'll need two years 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. A professional loan originator who is accustomed to this type of loan will give you insight on what documents you'll need for the application.
