Guide to Refinancing Jumbo Mortgage Loans

If you have a jumbo mortgage, it may be time to refinance. A jumbo mortgage is a mortgage that is larger than the typical mortgage. In most cases, a jumbo mortgage is anything over $417,000.

If you have been paying your mortgage for a while and your credit score has improved, you may be able to get a lower interest rate by refinancing. In this blog post, we will discuss the process of refinancing your jumbo mortgage and how to get the best deal possible.

The Jumbo Loan Refinancing Process

It is similar to refinancing a traditional mortgage in many ways.

Searching around for the best bargain is the first step. To compare mortgage rates from various lenders, utilize an online calculator. Make sure to compare mortgages with fixed and adjustable rates.

You must submit a loan application after locating the greatest deal.

  • The lender will require details about your earnings, employment history, and assets.
  • Additionally, a copy of your credit report will be required by the lender.
  • You must sign the loan documentation and complete the closing process after being granted the loan.
  • When you refinance your jumbo mortgage, closing expenses could be a requirement. These expenses include appraisal fees, title insurance, and origination points.

You can ask the lender to pay “points” to lower your interest rate, but this will increase the amount of cash required at closing.

Why should you refinance your jumbo loan?

You might desire to refinance your jumbo loan for a number of reasons.

  • A cheaper interest rate can be available to you if your credit is strong.
  • Over the course of your loan, you may save money by doing this.
  • If you have equity in your house, refinancing can be an option for you to get cash out. This can be used for debt relief, house upgrades, and other things.
  • By refinancing, you might also be able to reduce your monthly payment.

How soon can you refinance a jumbo loan?

The amount of time you have to refinance after receiving your jumbo loan is not predetermined. Jumbo mortgage lenders, however, usually impose tighter criteria on purchasers.

It is harder to find a lender willing to refinance a large loan. This is because, depending on your lender, jumbo loans could not need mortgage insurance, in contrast to conforming loans. Due to the higher risk associated with larger loans, lenders must be far more careful when qualifying borrowers for jumbo loan programs.

Your exact credit score may be required to qualify for a refinance of a jumbo loan, depending on the loan terms.

  • For 30-year fixed loans, you typically need a credit score of at least 680 points.
  • The credit score requirement for 15-year fixed-rate loans and ARMs is 700 or above.
  • Remember that your lender may even require that you have a score of at least 760 points if you’re refinancing a rental or investment property with your loan.
  • Lending Warehouse may have options available that require a minimum credit score of 640.

Lenders can look at how much of your monthly income is utilized to pay for regular expenses to calculate your debt-to-income ratio (DTI).

Cash reserves: You need to show your lender that you have enough money coming in to cover your monthly obligations. This requirement is especially important for jumbo borrowers because they provide a higher risk. Your lender may need to look over your bank statements to show that you have enough cash on hand to continue making loan payments in the event of financial trouble.

Is a jumbo cash-out refinance an option?

On your jumbo loan, you might be eligible to perform a cash out refinance. This implies that if you refinance your mortgage, you will get your money back.

  • Your home’s value and the equity you have in it will determine how much money you can get. Up to 80% of the value of your house can be available to you.
  • You must have strong credit and sufficient income to be eligible for a cash out refinance.
  • Closing expenses will also need to be paid. These can include title insurance, appraisal expenses, and loan origination fee

5 Useful Tips When Refinancing Jumbo Loans

Calculate Potential Savings by Refinancing

  • If you want to refinance in order to save money, knowing how much you stand to earn in comparison to what you must pay toward closing costs is useful.
  • By contrasting your present interest rate and payment with the rate you anticipate obtaining from the transaction, you can decide whether refinancing is even worthwhile.
  • Don’t forget to consider the break-even point or the time when your interest savings will cover the costs of refinancing. If you have a jumbo loan, even a small change in your interest rate might have a big impact on your future savings.

Do you have enough equity?

Many jumbo loan holders are using a refinance as an opportunity to access some of the equity they have built up as home values rise. You can try to obtain additional funds through a cash-out refinance if you require it to pay for home improvements or debt consolidation.

Even if you don’t intend to refinance with a cash-out, it’s a good idea to be aware of your equity. It will be simpler to persuade your lender to allow you to refinance your jumbo loan if you have a sizeable quantity of home equity.

Before talking to lenders about a new loan, it is typically advised to have at least 20% equity in your property.

Check Your Credit History & Score

A credit report and history check are necessary for any refinancing of a mortgage loan. When refinancing jumbo loans, lenders also take a person’s credit score into account.

This is because more money is typically at higher risk. Fannie Mae and Freddie Mac do not cover jumbo loans because they exceed the conforming loan criteria set by the Federal Housing Finance Agency (FHFA). Without this assistance, lenders will be held liable for any defaulted mortgages.

In addition to determining whether you can refinance your jumbo loan, your credit score also determines the kind of interest rates you qualify for. Try to enhance your FICO score above 700 if you want to improve it.

Be Prepared to Provide Documentation

Jumbo loan underwriting criteria have been tightened after the housing meltdown. This suggests that you must have all of your paperwork in place if you want to have a chance of refinancing your mortgage.

This is why it’s a good idea to set aside some time to gather your most recent pay stubs, tax returns from the last two years, and bank statements from the preceding six months.

You should be prepared to provide references and a copy of your profit and loss statement as evidence of your employment if you are self-employed and working as an independent contractor.

Analyze Current Refinancing Rates

Prior to refinancing any debt, it is essential to compare interest rates from various lenders. You will be aware of your eligibility for several things.

Shopping around may give you the opportunity to haggle terms if you find a lender you wish to work with.

In Summary

  • Homebuyers who obtained a jumbo loan during a period of unfavorable mortgage rates may find that refinancing can save their lives.
  • However, the refinancing process is challenging and filled with onerous restrictions, just like applying for a large loan.
  • Therefore, it’s crucial that you have your money and supporting papers in order before you even start the application process.

Lending Warehouse provides FREE consultation to help you understand all options available for refinancing jumbo loans. Call us today!

f you are curious about jumbo mortgages and would like to learn more about them, including how much they cost and how to qualify for one of these mortgages.