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Jumbo Refinance Home loans Could be Approved If you are Prepared
You're considering a jumbo loan for a home refinance while rates are low but you've been told, "Do to not waste your time and effort 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, particularly in a stagnant economy. Some banks may offer jumbo loans however their underwriting process is really strict that obtaining 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 loans within their portfolio. Finding this type of bank could be the first step inside your quest to have your jumbo loan refinanced. The right bank will have the widest variety of terms and have the most flexible underwriting guidelines. There are more points that needs to be considered when choosing the right bank.
Despite the inherent risks resulting from higher loan amounts, the basics 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 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 obviously the very first obvious difference between a standard home mortgage and the jumbo loan. With higher loans comes a lower LTV (loan to value) Have a much a minimum of a 20% equity position on the rate/term refinance.
The borrowed funds terms will be different between various lenders and it is always prudent to consider a lender that has a variety of options that can be targeted at your particular needs, whether you'll 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 loans are not as high as some borrowers think they would be. They often really are a tiny bit higher than conventional home loan rates and in some cases 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 one which has a clear knowledge of the distinctiveness from the higher loan borrower. For instance, although a lot of borrowers have a standard salary and W2 income, there are a disproportionate number in comparison with lower loan amount applicants that have a W2 income that include bonuses or commissions. Using the higher loan values, there's also a larger quantity of self-employed borrowers and professionals. Different calculations should be used 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 larger loan amounts need 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.
In order to be approved for a jumbo loan, you must be prepared with support documentation. Income documentation, documentation of reserves, letters of explanation, tax documents, etc. In short, you'll need 2 yrs tax returns with all of schedules, one month's newest pay stubs, two months newest bank statements, schedule of real estate owned, newest statements of stocks, bonds 401k and IRA accounts. An expert loan originator who's accustomed to this kind of loan provides you with insight on which documents you'll need for your application.
