Thinking of Refinancing Your Jumbo Loan? Here’s What You Need to Know

Applying for your jumbo loan took a ton of time and patience, so please do not expect anything less if you plan on refinancing that loan. The requirements are just as strict, and you will need just as much documentation as you did the first time. There is good news though, and that is that you can save hundreds of dollars each month if you are approved at a lower rate.

A Few Reasons You May Want to Consider Refinancing Your Jumbo Loan

1. When you refinance your jumbo loan, you can take out extra cash to have on hand. The amount you can take out varies, as it depends on the amount of equity you have and how much the lender will let you take of that equity.

2. If you have an adjustable rate jumbo loan, you might want to refinance to lock in a lower rate.

3. You can reduce the amount of your monthly payments.

4. You can lower your interest rate.

What is Needed to Qualify for Approval of Refinancing a Jumbo Loan

1. A FICO score of at least 700.

2. A debt-to-income ratio that is no more than 45%, but preferably much lower.

3. Proof of cash in the bank and other money you can use right away.

4. No bankruptcies within the last seven years.

5. Four or less mortgaged properties.

6. A loan-to-value ratio of 80%, but preferably less.

7. In addition to having cash in the bank, you may be required to have enough money to cover your mortgage, principal and interest, plus taxes and insurance for an entire year.

Documentation Required for Refinancing Jumbo Loans

1. Last two tax returns

2. Last two years of W-2 forms

3. Bank statements for 60 days

4. Pay stubs for 30 days

5. If you want to use bonuses and commissions, to boost your income, you must have two years’ worth of documentation.

6. A profit and loss statement with a balance sheet if you are self-employed

7. Any larger deposits or unusual deposits into a bank account must be explained and documented.

You will also need to pay closing costs and fees when you refinance your jumbo loan. You must take this into account when considering refinancing, because jumbo loan fees and closing costs are always higher than conventional loans.
You may be wondering if refinancing jumbo loans are really worth it, especially with all this hard work. We want you to know that they are definitely worth it! Consider this: You have a jumbo loan of $800,000 and you drop your interest rate by a quarter or half percent by refinancing. That is a huge amount of money that could be in your pocket instead of your lender’s. So, look into refinancing your jumbo loan if you think you can save a good amount of cash at the end.