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Can You Refinance Jumbo Loan?
What Is A Jumbo Loan?
The simplest definition of a jumbo mortgage is that it is a loan that doesn’t conform to the limits set by loan regulating bodies like the Federal Reserve, as well government related entities such as Fannie Mae and Freddie Mac.
This means that the loan isn’t backed by the government, and lenders are able to have more say in the terms, rates, and requirements for non-conforming loans.
The non-conforming nature of jumbo loans mainly extends to the limit of how much you are allowed to borrow. For instance, while most conventional mortgage loans have a limit of $417,000, jumbo loans go as high as $625,500. They are designed to offer borrowers an opportunity to access large amounts of cash for purchasing luxury properties.
Limits vary by location
Out of all the 3,143 counties in the USA, 2,916 of them have a jumbo limit of $417,000. Another 115 counties have set various limits that range from $417,000 all the way to $625,500. For example, in Denver County, Colorado, the jumbo limit is $458,850. 108 counties, including San Francisco, Los Angeles, and New York City have a jumbo limit of $625,500. In Hawaii, 4 counties have limits of between $657,800 and $721,050.
The reason why there are different limits for different counties boils down to the cost of real estate. Counties, where real estate is relatively affordable, have smaller limits – not so different from conforming loans. On the other hand, regions that have high-cost properties have higher jumbo loan limits. If you’re interested in a jumbo loan and want to know how much you can apply for, turn to a trusted company, like HomeRate Mortgage, who has a team of experts that are more than happy to help answer all your questions.
So, considering their high value, are jumbo mortgages hard to get? This is a natural question, but the answer is no, they’re not that difficult to be approved for. It helps if you have a good credit score and assets, or money to prove that you’re not likely to default on payments. Lenders will want to see that you have a history of study income.
How Jumbo Mortgages Work
From a general perspective, it is correct to say that a jumbo mortgage is like most conventional loans regarding application and approval. For starters, you will be required to make a jumbo mortgage down payment, which can be a lot if you’re considering taking out such a large loan.
The good news is that jumbo mortgages don’t necessarily require 20 down like most other mortgages. After the real estate market collapse of 2008, lenders made the 20% down an industry norm for jumbo mortgage loans as a precautionary measure. They had seen too many people default on their payments and were concerned this would happen again.However, they are slowly loosening the practice as the real estate market improves, especially for the already wealthy and ‘Henrys.’
Henry is an acronym for ‘high earner, not rich yet,’ a group of borrowers who are young professionals with lots of their savings tied up in employer benefits like retirement funds. These types of borrowers (the rich and Henrys) can now get jumbo mortgages with 10 down payment.
Do jumbo mortgages require PMI?
Yes, they do. Most of the people in the market for jumbo mortgages are wealthy individuals who are looking for a second or even third home – typically a luxurious property. Since the government doesn’t back these types of loans, as they do not consider a 2nd or 3rd home a basic need, lenders require homeowners have private mortgage insurance (PMI).
Jumbo Mortgage Interest Rates
Generally, jumbo mortgages have a higher interest rate than conforming loans. Of course, that is because their amount is much higher than a standard conforming loan, which increases the risk for the lender in the rare case a borrower is not able to pay back the mortgage.
But it should be known that rates have been on a decline on account of increasing competition among lenders coupled with the improving performance of the real estate industry. Homerate Mortgage works to take all of your information into account and offer you the best rates available and quick approval.
Do keep in mind that jumbo mortgage interest rates are usually charged on an adjustable rate basis. It is almost impossible to find a lender who offers fixed-rate jumbos. Also, as an additional precautionary measure, lenders usually require that your monthly mortgage payment should not be more than 38% of your pre-tax income. This is not a hard set rule but is meant as a guideline, so lenders know you are capable of paying back the jumbo mortgage loan.
Refinancing a Jumbo Loan
If you already have a jumbo mortgage and have been making timely payments faithfully, is it possible to refinance it? Yes, as long as you know what a jumbo refinance is and what it means for you.
A jumbo refi is the process of replacing your current jumbo mortgage with a new one. The goal is to replace your original interest rates to current market rates that are better.
You can use the built up equity that has accumulated (as a result of repairs and improvements) to apply for refinancing and enjoy lower interest rates and potentially better loan terms. With one option, a jumbo loan cash our refinance, you can even get some cash to your bank account to spend on any expenses you need.
Requirements for Refinancing a Jumbo Loan
Even before you know the qualifications required to refinance a jumbo loan, you should know where to look and who refinances jumbo loans. Most of them are lenders (financial institutions like banks) who have the jumbo mortgage loan package, but private companies, like HomeRate Mortgage, are usually able to offer better rates and more flexible conditions.
What you need:
- Good credit score and history
- Proof of income and current assets
- Evidence of consistent income
- A loan to debt ratio of not more than 38% of your monthly pre-tax income
- Documentation showing tax returns and mortgage payments.
When to Refinance Your Jumbo Mortgage
If you are considering selling your home in the near future then refinancing may not make sense. It may take several months or years before you recover the money from costs associated with refinancing.
If that isn’t the case, the best indicator of when to refinance is when jumbo refinance rates are low. Since a jumbo mortgage is a considerable amount of money, a reduction of .7 to 1.0% will have a significant effect on your monthly repayments. Talk to a specialist today to see what the best jumbo refinances rates are today and if it’s time for you to refinance.