Although refinancing hasn’t been the mortgage debt solution of choice for many people, there is still plenty of buzz surrounding the topic. As more lenders begin to push homeowners towards refinancing before they seek options like a loan modification, many people are being bombarded with confusing offers they don’t understand. A prime example, a jumbo refinancing mortgage loan.
What Does It Mean?
As with a regular jumbo loan, the refinancing version simply means it is more complex than the traditional FHA, Fannie or Freddie loans. They are considered “jumbo” because they typically exceed the loan limits set by the government, which are the primary loan caps for FHA or traditional loans.
Jumbo mortgage refinancing loans are also more difficult to find and get approval for. This is because they cannot be sold through government-sponsored enterprises, like Fannie or Freddie, and must be bought by private investor groups. These factors make the loan itself more risky, especially if the borrower defaults. Most lenders simply aren’t willing to take the risk.
Even if a borrower does find a jumbo refinancing loan, most will find getting approved to be very difficult. These loans require higher credit scores, more equity in the home and much lower debt-to-income ratios than traditional refinancing loans. In general, a homeowner looking to lower their payments in efforts to avoid potential mortgage problems is best served by a traditional refinancing loan and not a jumbo loan.