How to Refinance a Jumbo Mortgage
by Sandy from California
Ask Kate how to refinance a jumbo mortgage with 2nd mortgage HELOC: Kate, could you discuss what to do when you have a Jumbo Loan and a second HELOC from the same bank: Wells Fargo. In general, what are your recommendations when trying to get an adjustment in the rates or refinance. The second is an adjustable rate and the first loan is fixed. Any thoughts? Thanks for your time. I tried searching for this but was unsuccessful.
Kate Answers: How to Refinance a Jumbo Mortgage
Jumbos, as the name indicates, are mortgages with higher loan amounts than conforming mortgages.
The majority of conforming loans are backed by Fannie Mae and Freddie Mac who are restricted by law from purchasing loans over a certain limit. Loan amounts within their limits are known as conforming mortgages. Loan amounts above these limits are jumbo loans.
In most cases, jumbo mortgage rates cost more than conforming rates, approximately .5% to 1%, and impose stricter guidelines.
Before I continue discussing jumbos, let's look at today's baseline for national conforming loan limits.
(Updated to Reflect) 2016 Conforming Loan Limits
These charts display the 4 categories of 1st mortgage conforming loan limits. It is worth noting that the baseline loan limits for 2012 through 2016 remain unchanged from 2011.
(Updated to Reflect) 2016 Conforming Loan Limits: Contiguous States, Washington DC, Puerto Rico* 1-unit properties: $417,000
2-unit properties: $533,850
3-unit properties: $645,300
4-unit properties: $801,950
*39 counties within CA, CO, MA, NH, TN, and WA received higher loan limits in 2016. Check with your loan originator for the names of the individual counties and loan limits.
(Updated to Reflect) 2016 Conforming Loan Limits: Alaska, Guam, Hawaii, U.S. Virgin Islands 1-unit properties: $625,500
2-unit properties: $800,775
3-unit properties: $967,950
4-unit properties: $1,202,925
2011 Q4 High-Cost Area Conforming Loan Limits
As always, there are other exceptions to conforming loan limits. These high-cost area conforming loan limits apply to mortgages acquired by Fannie Mae and Freddie Mac in 2012 and originated after September 30, 2011. Conforming high-cost area loan limits vary county to county.
Not all geographic locations are eligible for these maximum loan limits. Consult your mortgage professional to learn which counties qualify.
2011 Q4 High-Cost Conforming Loan Limits: Contiguous States, Washington DC 1-unit properties: Up to $625,500 per county limits
2-unit properties: Up to $800,775 per county limits
3-unit properties: Up to $967,950 per county limits
4-unit properties: Up to $1,202,925 per county limits
2011 Q4 High-Cost Conforming Loan Limits: Alaska, Guam, Hawaii, U.S. Virgin Islands 1-unit properties: Up to $938,250 per county limits
2-unit properties: Up to $1,201,150 per county limits
3-unit properties: Up to $1,451,925 per county limits
4-unit properties: Up to $1,804,375 per county limits
Borrow even a dollar over these loan limits, and you are financing your home with a jumbo mortgage. (Exception: See FHA Loan Limit Higher than Conforming
Now this is important! Fannie Mae and Freddie Mac loans being refinanced must fall within current conforming loan limits, regardless of higher limits in force when existing mortgages were originated. So if you originated your mortgage during a year when limits were higher, depending on your geographical location, you may need a jumbo home mortgage today.
Prepare for Jumbo Home Mortgage Refinancing
There is no overseer like Fannie Mae or Freddie Mac to establish consistent jumbo mortgage guidelines.
Regardless, you'll still encounter similarities between conforming and jumbo.
Getting jumbo mortgage approval depends on your:
- Loan amount
- Appraised value (LTV)
- Type of debt
- Debt-to-income ratio
- Job history
- Credit history
- Credit scores
- Checking, savings, stocks, bonds, vested retirement account balances
You'll also find similar paperwork requirements. Use my easy checklist to get your ducks in a row. To see my list of common paperwork that should accompany your loan application, go to Kate's Personal Mortgage Planner
Here's another thought! If you are not restricted to refinancing with Wells Fargo, do you know of friends, family, co-workers, or neighbors who have recently refinanced jumbo mortgages? Ask which mortgage professionals originated their loans and if they'd recommend them.
HARP 3 Plan for Jumbo Loans
The Making Home Affordable Refinance Program (HARP 2.0) is a refinancing plan for homeowners with less than 20% equity. The vast majority have far less equity though and are generally underwater, that is, owe more than the value of their homes.
But for underwater homeowners without Freddie Mac or Fannie Mae mortgages, HARP 2.0 is of no assistance.
However, I'd like to draw attention to the proposed HARP 3 plan
. There has been some talk about upgrading HARP 2.0 into a HARP 3 program that assists more than Fannie Mae and Freddie Mac mortgages.
Today, this is little more than scuttlebutt albeit announced by President Obama and furthered by members of Congress. Other than the intent to save a vast greater amount of underwater homes, guidelines are in initial proposal stages.
So keep your eye on my blog page where I announce breaking mortgage news
, for example, HARP 3 updates. This would be especially important if your refinance with Wells Fargo hits a brick wall.
HAMP Modification for Jumbo 1st Mortgages and 2nd Liens
Another option you might consider is a HAMP Mortgage Loan Modification
offered through loan servicers in conjunction with the Making Home Affordable Program.
Not knowing the amount of your mortgage, I hope this guideline might be of interest to you.
"You owe up to $729,750 on your primary residence or single unit rental property."
HAMP also offers 2nd mortgage modifications. The name of the program is Second Lien Modification Program, or for short, 2MP. If your 1st mortgage has been permanently modified under HAMP with less than three consecutive monthly payments being missed, you are eligible for a 2nd lien modification.
Although some homeowners may consider HAMP inferior to HARP or traditional refinance terms, I bring it up because of your 2nd mortgage. Secondary liens have a way of complicating the loan approval process. So keep this idea in your back pocket, if the refinance process with Wells Fargo starts going sideways due to the 2nd mortgage.
It is worth noting that in high-cost areas, FHA loan limits
have gone as high as $729,750 depending on the year. So this also could be an alternate plan for refinancing a jumbo mortgage, depending on how much you owe and the year.
Good luck and best wishes,
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