Conforming Jumbo Mortgage Refinance Hot, Interest Rates Low
By: Rosemary Rugnetta
September 1, 2010 (FreeRateUpdate.com) – Conforming Jumbo Mortgage Refinance Hot, Interest Rates Low
While mortgage rates continue at record low levels, overall volume of refinances have continued to increase throughout the nation. Borrowers are continuing to refinance their existing mortgages in an effort to free up some needed cash and, at the same time, reduce their debt. Since the inclusion of certain jumbo loans into the conforming loan arena back in 2008, conforming jumbo mortgage refinances have been hot while interest rates remain low.
Back in 2008, the Economic Stimulus Act increased the loan limits for conforming mortgages backed by Fannie Mae and Freddie Mac. These loan limits vary by geographic area. The normal conforming loan limit for single family housing is $417,000 with the limit in high cost areas at $729,750. The normal loan limit for Alaska, Guam, Hawaii and the U.S. Virgin Islands is $625,500 with the high limit in those areas at $938,250. With this increase in limit, many borrowers, who could not refinance, have found this expansion of loan limits to be a tremendous opportunity. Even though these conforming jumbo loans must comply with the underwriting rules set by Fannie Mae and Freddie Mac, which include credit and income requirements, they are still considered to be a low risk product and carry lower mortgage interest rates than regular jumbo loans.
As with all loan types, conforming jumbo mortgage refinances have their guidelines. Cash out refinance is not permitted as only enough cash to pay for closing cost, with a limit of $2,000, is allowed. Also, payoff of home equity debt cannot be included in the refinance. As for LTV for refinances, the first mortgage cannot exceed a loan to value of 75% and the combined LTV with a second mortgage (home equity loan) cannot exceed 95% of the appraised value. For refinances of second homes and investment properties, the allowed LTV is 60%. The debt to income ratio limit for all is 45%. With LTVs 80% and higher, borrowers will required to pay private mortgage insurance and the minimum credit score allowed is 700. Lower LTVs allow a credit score as low as 660. Borrowers need to be aware that these are fully documented loans and any late mortgage payments within the previous 12 months will disqualify them.
Since these conforming jumbo mortgages are available until December 31, 2010 and interest rates are historically low, borrowers are taking advantage of this last minute opportunity and refinancing their higher rate mortgages. As rates continue to remain steady or even decline further, refinancing will continue to strengthen. Each time the interest rate goes lower, a refinancing opportunity opens up for another group of borrowers as these high limit conforming loans cover a large part of the housing market. As conforming jumbo mortgage refinances continue to be a hot product in market and interest rates remain low, the record low interest rates may be the only part of the economy that is stable.