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Jumbo Refinance Mortgage Loans Could be Approved If you are Prepared
You are considering a jumbo loan for a home refinance while rates are low but you have been told, "Do not to waste your time and effort applying. Not now, since the banks aren't lending!" Most banks aren't too keen on approving jumbo loans. The jumbo loans are considered a higher risk loan, especially in a stagnant economy. Some banks may offer jumbo loans but their underwriting process is so strict that obtaining the jumbo loan towards the closing table is impossible. There are some banks that handle jumbo loan efficiently and can hold these financing options in their portfolio. Finding this kind of bank may be the initial step in your quest 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 needs to be considered when choosing the right bank.
Despite the inherent risks resulting from higher loans, the fundamentals of home loan underwriting still apply. Like home 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 mortgage loan where 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 home loan exceeding these limits is recognized as a jumbo loan. This is of course the very first obvious distinction between a standard mortgage and also the jumbo loan. With higher loans comes a lesser 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 number of options that can be tailored for your particular needs, whether you'll 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 as high as some borrowers think they'd be. They often really 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 the bank that you should use is a that has a clear knowledge of the distinctiveness of the higher loan borrower. For example, although a lot of 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 that include bonuses or commissions. Using the higher loan values, there are also a larger quantity of self employed borrowers and professionals. Different calculations ought to be used for this type of borrower to match depreciation, depletion, bonuses and commissions. For any borrower's best shot at loan approval and efficiency, the higher loan amounts require a bank that has a staff of underwriters and originators who have a higher set of skills and training for this type of mortgage origination and underwriting.
To become approved for a jumbo loan, you have to bring along support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In a nutshell, you will need 2 yrs tax statements with all schedules, one month's most recent pay stubs, two months newest bank statements, schedule of real estate owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who is accustomed to this type of loan provides you with insight on which documents you need for the application.
