In many areas throughout the United States, the cost of homes has increased in recent years. In fact, the selling prices of homes, even single-family homes, now often exceed the set conforming loan limits for conventional loans. As a result, Jumbo loans are becoming more of a common option than ever before.
The conforming loan limit varies from state to state and increases in areas with a high cost of living. In most of the country, 2023 loan limits tend to be around $715,000. Though, they can be as high as $1,073,000 in high-cost areas like California, Hawaii, Alaska, Guam, and the U.S. Virgin Islands. Anything that falls outside of the conforming loan limit for a particular state is where jumbo loans come into play.
While jumbo loans have been an excellent way for homebuyers to keep up with ever-increasing home prices, they are notoriously difficult to qualify for. This is because jumbo loans are larger loans that are risky investments for lenders since they aren't insured by Fannie Mae and Freddie Mac. As a result, qualification requirements are stricter, and borrowers must undergo a more rigorous application process than someone applying for a conventional loan.
If you are one of the many individuals that have had to take on a jumbo loan in recent years, it may be time to consider refinancing. Some common reasons many end up refinancing their jumbo loans involve lower interest rates, shortening or lengthening a loan term, getting rid of an adjustable-rate mortgage (ARM), or transitioning into a conventional loan.
You may also want to consider a cash-out refinance if you have some home improvement projects you've wanted to tackle or some high-interest credit card debt you've wanted to eliminate. You can strategically use the funds to put yourself in a better financial position in relation to debt or other big-ticket expenses like paying for college tuition or student loan debts.
Interest rates are a major motivating factor in many refinances. If rates are lower than when you first took out your jumbo loan, it might be a good idea to refinance. You can use that boost to pay less in overall interest over the loan's lifetime. Additionally, this makes it possible for you to pay more of your principal balance each month rather than interest.
For those who have recently experienced life events that have made their financial situation more tenuous, some may consider refinancing to lower their monthly payments. Some pros and cons accompany each reason, so it's best to consider all options and possibilities with the help of a mortgage expert to determine what is best for you. It is harder to find lenders who offer jumbo loans, so be sure to shop around and compare rates before deciding.
There aren't set rules that state how long you have to wait to refinance after getting your jumbo loan, but you should expect some rigid guidelines depending on your lender. If you've already been through the jumbo loan application process, be aware that the refinance process will be just as stringent.
Here's what you'll need to provide proof of:
Once you have decided you're ready to refinance your jumbo loan, you'll need to complete the following steps:
While the application and approval process is intensive, we make the process as simple as possible here at American Financing. We provide you with step-by-step guidance throughout the entire process and tailor every loan program to fit your specific needs and goals. We recommend that you give us a call when you're ready to start looking at your options. Our salary-based mortgage consultants are available seven days a week to answer your questions and assist you in your search. So call (800) 910-4055 today!
Most looking to refinance their jumbo loan should consider the following options before making a decision:
While not too much higher, jumbo loans will come with slightly higher rates and fees. This is because jumbo loans are for properties that exceed conforming loan limits and are riskier for lenders to offer. As a result, the loan comes with higher closing costs. In addition, since jumbo loans have higher principal balances, the loan requires a larger down payment.
You can refinance into a conventional loan if conforming loan limits change, and your property no longer exceeds the loan limits. In fact, refinancing to a traditional loan will provide you with lower interest rates and are easier to be approved for.
If the loan amount is for or exceeds $1 million, lenders often require two appraisals of the property. The borrower is the one who pays for the appraisal, so keep this factor in mind, so you're not surprised with additional fees.
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