What’s so special about jumbo mortgages?
- They're bigger - Jumbo (or non-conforming) exceed the loan amount limits set by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Those maximums are set by Congress and based on home prices in your area. The highest conforming loan amount allowed for a single family residence is $729,750.
- They're harder to get - Because they cannot be sold through the GSEs, jumbo mortgages are bought by groups of investors that create their own sets of guidelines. Jumbo refinance mortgages are sold by banks, credit unions, mortgage brokers and other companies. However, many lenders do not deal in them, or impose very restrictive loan-to-value, credit score and property requirements. That's what makes finding jumbo or super-jumbo financing so much harder than getting a GSE refinance.
- They cost more - Jumbo mortgages are generally more expensive than conforming mortgages, and shopping for them is more challenging. Rates can vary between lenders by .5%, according to Mortgage Industry Information Corporation, so it's even more important for people with jumbo loans to shop for the best mortgage rates and terms.
Where do you find jumbo refinance mortgages?
So, if you have a jumbo mortgage, where should you look for a refinance?
- Magic list of jumbo lenders - Sadly, there is no such list with loan pricing and guidelines online. You can, however, review jumbo refinance rates on this site, and request personalized rate quotes from participating licensed and reputable lenders.
- Mortgage brokers - Mortgage brokers have access to many programs and can do a lot of the legwork for you. A good broker not only knows where the programs are, he or she can tell you which lenders offer the best refinance rates and are most likely to approve your application. Working with a jumbo mortgage specialist can help you dodge pitfalls.
- Local real estate agents - Local agents who list a lot of high-end homes know who finances them and who does a good job. Understand, though, that a real estate agent's priority is that the mortgage gets approved and closed quickly. They are less concerned about who offers the best refinance rates.
Tracking down the lowest jumbo mortgage rates
Everyone wants the best mortgage rates, but shopping wisely is even more important for homeowners with jumbo mortgages. The larger your home loan is, the more you can save by lowering your rate. For example, the payment on a $50,000 mortgage at 5.% is only $37 more than it is at 3.75%, but the difference is $370 a month for a $500,000 loan.
Shopping around is one way to lower your refinance rate. Here are three more:
- Test drive a hybrid - Hybrid ARMs feature rates fixed for three, five, seven or ten years, and are substantially discounted by lenders. When fixed-rate jumbo loans are at 4.5%, the 5/1 hybrid ARM rate may be 2.75%.
- Accept a penalty - In exchange for your promise not to repay your loan within an agreed-upon period of time (usually two to five years), your lender reduces the interest rate. The penalty kicks in if you pay the loan off earlier than agreed. "Soft" penalties apply only if you refinance early, "hard" penalties apply if you sell or refinance.
- Self-improvement - While not a standard practice in jumbo financing, many lenders do add some risk-based surcharges to their loan fees. Improve your credit score by a few points, or bring in cash to lower your loan-to-value. Ask your lender.
It's true that homeowners with jumbo mortgages do face greater challenges finding and closing refinance mortgages. Fortunately, the rewards are greater as well.