In the United States, jumbo loans are large loans that range from $417,000 to $625,500. The amount is dependent upon the location of the home in a county. These loans are higher than the average loan, causing you to have to pay higher interest rates and greater mortgage payments. A way to reduce both the interest rate and monthly payments is through refinancing the loan. This is difficult to accomplish as there are specific rules that must be met in order to qualify to refinance your loan. What needs to be considered when refinancing a jumbo loan?
- Is refinancing in your best interest? Similar to how paying off loans take planning, refinancing your jumbo loan also needs to be planned. Refinancing is a good option if you do not have plans to sell your home anytime soon. Refinancing costs money. Therefore, you want to be sure that you break even in calculating the additional cost from refinancing and the savings from the monthly mortgage payments before you move homes. A reduction of a jumbo loan by even a rate of .75 or 1 is going to save a large sum of money.
- How long have you had your loan? The longer you have had it, the more challenging it will be to refinance it. Because of the Dodd-Frank Wall Street Reform and the Consumer Protection Act, jumbo loans in recent years are more likely to qualify for refinancing.
- Do you have good credit? You have to have a good credit score to refinance, even better than if you have a regular or FHA loan. Documentation that proves your credit include:
- Pay stubs proving your income from at least the last 30 days
- Tax returns going back two or three years
- Bank statements that demonstrate mortgage payment reserves for the last six months
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