If you buy apparel from “big and tall” clothing stores, you’re
used to paying more and having less to choose from. “Regular guys,”
on the other hand, benefit from a wider selection of products and
more competition between retailers.

Jumbo mortgage refinancing is the same way — a jumbo loan is
harder to find and more expensive than smaller Fannie Mae, Freddie
Mac or FHA loans.

How are jumbo mortgages different?

1. They’re bigger:

   Jumbo (or nonconforming) mortgages are those with balances that
   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
   is $729,750.

2. They’re harder to get:

   Because they cannot be sold through the GSEs, jumbo mortgages are
   bought by groups of investors who create their own sets of
   guidelines. Or, these mortgages are retained by the mortgage
   lenders that originate them. Todd Huettner of Huettner Capital
   says, “Most jumbo loan guidelines start with conforming
   guidelines. They then raise the maximum loan amount allowed and
   tighten up everywhere else.” Applicants need higher credit
   scores, more equity, lower debt-to-income ratios and more assets
   to get approved for jumbo loans.

3. They cost more:

   Jumbo mortgages are generally more expensive than conforming
   mortgages, and the market for them is highly fragmented. Rates
   can vary between lenders by .5 percent, according to the Mortgage
   Industry Information Corporation. That means it’s even more
   important to shop for the best
   mortgage rates

   and terms.

Where do you find jumbo refinance mortgages?

Jumbo refinance mortgages, like conforming 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.

Here are three places to find jumbo mortgages:

1. The Internet:

   Internet companies with excellent reputations list licensed
   mortgage lenders and refinance rates. It’s a great starting point
   for comparing mortgage rates. You can also request personalized
   mortgage rate quotes from participating licensed and reputable
   lenders.

2. 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, but also can tell you which lenders offer the best
   refinance rates and are most likely to approve your application.
   Huettner says, “While your loan may not qualify with one lender,
   it could be fine with another. Jumbo loans are much more
   difficult to close than traditional loans. Because jumbo loan
   program guidelines vary more than conforming loans, it is often
   the little details that rear their ugly head and cause problems.”
   Work with a jumbo mortgage specialist to dodge pitfalls.

3. 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. When your home loan is large, even a small
difference in the mortgage rate can have a big impact on your
wallet.

For example, the payment on a $50,000 mortgage at 5.5 percent is
only $16 more than it is at 5 percent. On the other hand, the
difference between a 5 percent and 5.5 percent rate on a $500,000
loan is $180 a month. That’s almost $11,000 over five years.

Shopping around is one way to lower your refinance rate. Here
are three more:

1. Test drive a hybrid:

   Hybrid ARMs feature rates fixed for three, five, seven or 10
   years, and are substantially discounted by lenders. When
   fixed-rate loans are at 4.5 percent, the 5/1 hybrid ARM rate may
   be 2.75 percent.

2. 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.

3. Self-improvement:

   While not a standard practice in jumbo financing, many lenders do
   add some risk-based surcharges to their loan fees. Improving your
   credit score by a few points or bringing in cash to lower your
   loan-to-value could save you thousands. 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.