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With a jumbo loan, you’re borrowing more money than the average borrower. To compensate for that risk, lenders impose a strict set of requirements on refinances. But if you can meet them, you could cut down your payments by thousands per year and unlock the equity in your home.
Refinancing a jumbo loan involves a lot of paperwork. To maximize your savings and streamline the process, follow these steps:
Among other requirements, you’ll need a credit score of 660+, a debt-to-income ratio of 43% and at least 20% equity in your home. If you can’t meet all the requirements, focus on improving areas that can get you over the line.
Look for a loan with a stronger rate or shorter term. Ask questions about rates and fees, then choose a competitive lender that suits your needs.
Before applying, weigh the costs of your potential new loan against your current mortgage to decide whether refinancing makes financial sense.
Review the loan estimate form from your lender, which includes the loan offer and the list of fees. Start filling out the loan application.
Prepare the paperwork, including pay stubs, bank statements and tax returns. Know that you may need to supply your lender with letters of explanation (LOE) clarifying anything from your employment history to bank transactions.
Review, sign and return the closing disclosure form to your lender. After that, you’ll need to sign your loan documents either electronically or at the title company or closing attorney’s office.
The lender pays off your existing home loan and registers your new one with the county.
There are many benefits of refinancing a jumbo loan, but also several drawbacks.
Jumbo loans have strict eligibility requirements, and lenders often add their own overlays. To qualify for a refinance, you’ll have to show you’re in excellent financial standing.
You can increase your chances of approval with the following:
Jumbo loan refinances have higher loan amounts than other refinances, but similar interest rates and fees.
If you want to refinance a jumbo loan, be prepared for a mountain of paperwork. It can be worth it, though; refinancing to a lower rate or shorter term can save you thousands in interest annually and allow you to tap into your home’s equity.
Before committing, compare mortgage lenders to make sure you’re getting the best possible rate.
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