Refinancing A Jumbo Mortgage
Refinancing A Jumbo Mortgage
Refinancing A Jumbo MortgagePrior to the economic crash of 2008, Jumbo mortgages could be easily obtained from a broad range of lenders. As credit markets tightened, access to high balance mortgage products disappeared. The reason is that there is more risk associated with originating Jumbo mortgages, which caused many lenders to back out of the Jumbo market during the financial crisis. The biggest reason is the lack of buyers in the secondary mortgage market, which increases risk and cost for lenders. Unlike conforming loan products, there is no government backed Fannie Mae or Freddie Mac to buy up high balance mortgages once a lender has originated the loan. This increases the chance that the originator may be left holding the loan, which reduces the amount of funds they have available to lend. In addition, expensive luxury homes are also difficult to appraise due to a lack of sales comparables. Therefore, values tend to be more volatile. The loan limit for conforming fixed rate mortgage products is $417,000, or as much as $729,750 if the property is located in a high cost area as determined by the Department of Housing and Urban Development. Loans in those high cost areas in excess of the $417,000 threshold are considered Super Conforming loans. Rates on Super Conforming loans are slightly higher than regular conforming loans, but they provide the borrower with a 30 year fixed rate option that is difficult to find in the Jumbo market. Most Jumbo products available today will be either 5/1 or 7/1 ARM's, and usually have lower Loan-to-Value requirements than similar conforming loans. With rates likely to increase in the coming months, it is recommended that anyone currently in a Jumbo ARM, refinance into another ARM or possibly a fixed rate loan. This is especially the case for anyone who has an interest only loan or ARM that is due to adjust. Requirements for Jumbo mortgages vary widely from one lender to the next, but if your loan amount is 65% or less of the appraised value, and you have 720+ FICO you should have no problem refinancing. Once loan amounts begin to go over 65% Loan to Value or credit scores drop below 720 FICO, refinancing into a high balance loan becomes more difficult. This isn't to say that you wouldn't be able refi, but there will be fewer lenders to choose from and the rate is likely to be higher. In addition to FICO scores and Loan to Values, the occupancy status and property type can impact the requirements to get a high balance loan. For instance, second homes and condos may require even lower Loan to Values and may be accompanied by higher rates. With that said, Jumbo loans are becoming more accessible and requirements are easing as many lenders take on more risk. If you considered refinancing your Jumbo mortgage in the past couple years, but found it difficult, you may want to contact a mortgage professional to revisit the topic.