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Jumbo Refinance Home loans Can 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 keen on approving jumbo loans. The jumbo loans are thought a higher risk loan, particularly in a stagnant economy. Some banks may offer jumbo loans but their underwriting process is so strict that getting the jumbo loan to the closing table doesn't seem possible. There are a few banks that handle jumbo loan efficiently and will hold these financing options in their portfolio. Finding this kind of bank may be the first step inside your quest to have your jumbo loan refinanced. The best bank will have the widest variety of terms and also have the most flexible underwriting guidelines. There are other points that should be considered when choosing the right bank.
Regardless of the inherent risks resulting from higher loans, the fundamentals of mortgage 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 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 limited to $417,000.00 or $625,500 in Alaska or Hawaii. Any home loan exceeding these limits is considered a jumbo loan. This is obviously the very first obvious difference between a standard mortgage and 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 borrowed funds terms will vary between various lenders and it's always prudent to consider a lender which has a variety of options that can be tailored for your particular needs, whether you need a Thirty year fixed rate, a 15 year fixed interest rate or a 5/1, 7/1 or 10/1 hybrid ARM or interest only. The eye rates on these higher loan amounts are not as high as some borrowers think they'd be. They often are a tiny bit greater than conventional mortgage rates and perhaps they might be lower than some conventional loans after their rate adjustments.
Many borrowers have unique situations and also the bank that you should use is a that has a clear understanding of the uniqueness from the higher loan borrower. For example, although many borrowers possess 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. Using the higher loan values, there are also a larger number of self-employed borrowers and professionals. Different calculations should be employed for this type of borrower to match depreciation, depletion, bonuses and commissions. For a borrower's best shot at loan approval and efficiency, the larger loan amounts require a bank which has a staff of underwriters and originators who have a higher set of skills and training for this type of loan origination and underwriting.
In order to be approved for any 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 will need two years tax returns with all of schedules, one month's most recent pay stubs, 8 weeks most recent bank statements, schedule of property owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who's accustomed to this type of loan will give you insight on which documents you need for your application.
