Some of you may be in luck, however. There are mortgage solutions out there for those with bigger balances--if you know where to look.
It's No Joke: Check Out FHA
FHA limits may be higher than conforming (Freddie Mac or Fannie Mae) limits in some locations. For example, if you live in Alameda County, CA, the FHA loan limit is $729,750, but Fannie and Freddie wimp out at $625,500. Do you have a duplex, triplex, or fourplex? You could be in million dollar territory--check it out. In addition, you may be eligible for jumbo conforming financing from Fannie or Freddie. Conforming mortgage limits in about twenty higher-cost areas range from a low of $426,650 in Providence, RI up to $721,050 in Honolulu, HI.
So, this ARM and this Fixed Rate Loan Go into a Bar....
...And one day they give birth to a hybrid ARM, which has the characteristics of both loans. Jumbo hybrid adjustable rate mortgages (ARMs) may be fixed for three, five, seven, or ten years, and the 5/1 variety carries some of the lowest mortgage rates available--over a point lower than a comparable fixed-rate loan. If you have a $625,000 mortgage with a 30-year fixed jumbo interest rate at 6.5%, you may be able to refinance to a 5/1 hybrid at only 5.25%. The new payment is $3,451, a savings of $499 a month. Over five years, you'd save almost $30,000--about the price of a BMW 135i!
Try the Two for One Special
When it comes to refinancing a jumbo mortgage, two loans may be better than one--try combining a conforming first mortgage with a home equity loan. Here's how it can work to your advantage: say you have a $625,000 jumbo mortgage and live in Ventura County, CA, where the conforming loan limit is $598,000.Try a 5% $598,000 first mortgage and an 8% second mortgage of $27,000. Your blended rate can be calculated as follows: $598,000 divided by $625,000 = 95.68%, and $27,000 / $625,000 is 4.32%. Then take 5% * 95.68% plus 8% * 4.32% and you get 5.13%. Another bonus: home equity lines cost much less to originate than traditional refinances. A couple of points saved on $27,000 equals $540--that's a lot of gas money!
Conforming Can Be Ugly
If it's been awhile since you last shopped for a mortgage, you may be surprised. Mortgage lenders' advertised conforming interest rates aren't always available. Fannie Mae and Freddie Mac make use of risk-based pricing adjustments, and for those with credit or property issues, the best mortgage rate you qualify for may be no improvement over refinancing with a jumbo mortgage lender.
"I'm from the Government, and I'm Here to Help"
If your mortgage payment exceeds 31% of your gross monthly income and is causing you genuine hardship, you may be eligible for a government-backed mortgage modification with a rate as low as 2%. That's the best deal going if you can get it. Making Home Affordable modifications are available for mortgages up to $729,750. Check your eligibility then call your loan servicer.
Jumbo mortgage refinancing can be tougher, but the savings are bigger too. Even a slight improvement in your refinance mortgage rate nets greater dollar savings on larger loans.