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Jumbo Refinance Home loans Can Be Approved If you are Prepared
You are thinking of a jumbo loan for a 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 considered high risk loan, particularly 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 within their portfolio. Finding this type of bank may be the first step inside your quest to have your jumbo loan refinanced. The right bank may have the widest array of terms and have the most flexible underwriting guidelines. There are more points that should be considered when choosing the right bank.
Regardless of the inherent risks posed by higher loan amounts, the basics 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 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 limited to $417,000.00 or $625,500 in Alaska or Hawaii. Any mortgage loan exceeding these limits is recognized as a jumbo loan. This really is obviously the first obvious distinction between a standard home mortgage and also the jumbo loan. With higher loan amounts 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 be different between various lenders and it's always prudent to look for a lender that has a variety of options that can be tailored for your specific 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 are not as high as some borrowers think they would be. They often are a tiny bit higher than conventional mortgage rates and in some cases they might be less than some conventional loans after their rate adjustments.
Many borrowers have unique situations and the bank that you should use is one that has a clear knowledge of the distinctiveness from the higher loan borrower. For instance, although a lot of borrowers possess a standard salary and W2 income, there's a disproportionate number in comparison with lower amount borrowed 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 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 higher loans require a bank that has a staff of underwriters and originators who have a higher skill set and training with this type of loan 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 statements with all of schedules, one month's most recent pay stubs, 8 weeks newest bank statements, schedule of property owned, most recent statements of stocks, bonds 401k and IRA accounts. An expert loan originator who is accustomed to this kind of loan provides you with insight on what documents you need for your application.
