For Luxury Lovers…. Jumbo Refinancing might be Just What You’re Looking for
Ever wanted that deluxe apartment in the sky or a crazy luxury home but have no idea how to acquire it? It’s like being Bugs Bunny with a carrot dangling in your face, but it’s just outside of your grasp. To the venture capitalist or the new age internet marketing conqueror, this is a great situation to start building your own castle! There’s no place like home and why not make it a dream?!
This is a type of refinance that allows borrowers to exceed the typical loan limit ($417,000 to $625,500 depending on the state) imposed by government based sanctions like Fannie Mae and Freddie Mac Loans standards. Typically, this refinancing is bought out by investors and sold by different banks, mortgage companies, credit unions, etc. It’s important to do your research to find out loan limits in your state before considering a Jumbo refinance. Also, you may find the loan limit gets higher depending on the number of units available in the home.
What are the eligibility requirements?
Here’s where things get a bit tricky. While some of the qualifications do conform to more conventional loan aspects, there are some major difference. Instead of paying a private mortgage insurance, the down payment of the initial buy is higher. Not to mention, there’s not much room for mid-level credit score. Most lenders won’t accept a client that doesn’t have at least a 700 credit score. Additionally, you must have at least 6 month cash reserves in your bank after closing. This can amount to at least 20% of the loan. Make sure you are prepared to spend some greenbacks. In other words, if you’re not a corporation or someone who has a high paying job — you are out of luck. Top dollar only for this kind of loan. The benefit of a jumbo loan are the rates tend to be lower and the payments can be tax deductible.
Risks associated with a Jumbo refinance
All loans have their risks but this one is a bit of an interesting case. Lenders have to seriously watch their behind because of the amount of money borrowed. It’s not easy to recover from a default on a high level mortgage. In fact, it can severely reduce the value of the home and diminish profits substantially. If you are looking for a luxury property, they may take you straight to the mud and track your income/credit history like a bloodhound. Don’t be surprised if you have to get a few appraisals just to prove to the lender that you are clear for take off in refinancing a jumbo loan..
Convincing a lender for the refinance
Money and stability both play a huge role. If you are trying to refinance a luxury home worth 2 million dollars, don’t try to ask a lender when you can’t even make half of that in a couple of years. You need a track record that shows you’re capable of handling that responsibility. Show the lender that you are financially responsible and you make a reasonable amount of money to where he doesn’t have to worry. Even though the minimum is 6 months of reserves, why not have a year? This just says you are prepared for what’s to come, and that will ease the lender’s worry. Also, it’ll help you out just in case you run into issues.
Before you go head first in trying to buy a giant castle, make sure you have enough stability to keep on with payments. It shouldn’t be a burden due to your high-level position and deep pockets. Otherwise, you may have to save your chips for another day. Look at what the lender has to offer and learn the type of down payment needed to begin acquiring the home. Shop around to find the best deal that works for you and your ultimate goal of obtaining a dream home.