How Do You Refinance a Jumbo Mortgage

Jumbo Mortgage

This article will discuss what a jumbo mortgage is and how do you refinance it into a new mortgage.

First, we need to understand what constitutes a jumbo mortgage. Conforming loans have a maximum amount set annually by Fannie Mae and Freddie Mac. Typically, these loan limits increase year over year depending on how overall home prices are moving.

The current conforming loan limit in 2022 was $647,200 and for 2023 is expected to rise to $715,000. So, any loan amount above this limit is termed a jumbo mortgage as the money is being provided by another source or institution.

Whether you are buying a home needing a jumbo mortgage or refinancing an existing one understand jumbo mortgages can carry more risk as the loan amounts are much larger giving the investor more exposure if the loan goes into default. Typically, you will see stricter underwriting guidelines.

What comprises these guidelines? Typically, you will need a higher credit score. Many jumbo investors look for at least a 680 credit score where conventional, conforming and FHA/VA loans go as low as 620. Your Debt-to-Income ratio cannot go as high as other loans. Jumbo investors look for 36 – 40% DTI where on other loans you can go has high as 50 DTI. Lastly, typically more cash reserves will be required over conventional and government loans.

Lastly, there can be more cost associated with a purchase or refinance of a jumbo loan. So, refinancing a jumbo loan is not too different than refinancing a conforming loan other than more scrutiny within the loan.

It’s always good to speak with a trusted mortgage company such as Hall Financial to determine if a jumbo mortgage is the best option for you.