FHA High-Balance Mortgage Guidelines In High-Cost Counties


This ARTICLE On FHA High-Balance Mortgage Guidelines In High-Cost Counties Was PUBLISHED On February 14th, 2020

What are FHA guidelines for high-cost mortgages

FHA High-Balance Mortgage Guidelines In High-Cost Counties in the United States:

  • If you have been following the Gustan Cho Associates updates on FHA mortgages for 2020, you are already aware of the loan limit increases
  • In this blog, we will detail how to use an FHA loan to purchase a home and a high balance area such as Denver, Colorado or Los Angeles, California
  • We will also discuss the advantages FHA mortgages offer and how to apply for an FHA loan in a high balance area at Gustan Cho Associates

In this article, we will discuss and cover FHA High-Balance Mortgage Guidelines In High-Cost Counties.

Understanding FHA High-Balance Mortgage Guidelines In High-Cost Counties

Since the Federal Housing Administration (FHA) places limits on the mortgage is it insures, it is important to understand the guidelines when buying a home and a high balance area.

  • The Federal Housing Finance Agency (FHFA) will adjust loan limits every calendar year based on the home price index (HPI) throughout the past 12 months
  • For the most recent years, the loan amounts have been increased year after year
  • There have been times in history with the loan amounts have decreased based on property values decreasing
  • Once again, these numbers are based on the home price indexes

Depending on where you live in the country home values will fluctuate dramatically. If you took a single-family house from Nashville, Tennessee and moved it to San Francisco California, the value would be dramatically different. That is why the limits are based on individual counties.

FHA High-Balance Versus Baseline Loan Limits

The baseline limit for FHA mortgages in 2020 is $331,760 and the maximum on the bed or ceiling is $765,600. Any area where the

  •  FHA loan limit is above 331,760, is considered a high cost or a high balance area
  • That is because the average median home cost more than the FHA maximum loan amount for non-high cost areas ($331,760)
  • The Federal Housing Administration is overseen by the U.S. Department of Housing and Urban Development (HUD)

HUD’s number one priority is to provide affordable home housing to the American people. If you live in an area where property values are high, HUD still wants you to have access to FHA mortgage financing.

Benefits Of FHA Financing

What are Benefits Of FHA Financing

What are some advantages of FHA financing?

  • FHA mortgage loans require only a 3.5% down payment
  • This low-down-payment option is designed to open up homeownership to more Americans
  • It is a common misconception that you need a minimum of 20% saved for the down payment to purchase a home
  • FHA even allows 3.5% down payment for multi-unit properties (up to 4-units)
  • A great way to buy a long-term income-producing real estate asset
  • Please remember, you may only utilize an FHA loan to purchase a primary residence, so you must live in one of the units

Check out our blog on MULTI-UNIT FHA MORTGAGE GUIDELINES for more information.

FHA Guidelines After A Housing Event

Shorter waiting periods after derogatory credit events.

  • Compared to conventional mortgages, FHA waiting periods are more forgiving for catastrophic events such as a foreclosure, short sale, or deed-in-lieu
  • Even with a foreclosure, you only need to wait 3 years from the recorded date to qualify for FHA financing. A conventional loan has a seven-year waiting period!

FHA loans are a great tool to get back into homeownership after a derogatory event.

FHA Chapter 13 Bankruptcy Guidelines

Looser bankruptcy guidelines:

  • FHA mortgages are much more forgiving during bankruptcies
  • If you are in an active chapter 13 bankruptcy, you may qualify for an FHA high balance mortgage after making 12 on-time payments to the trustee
  • Keep in mind, you will need the trustee’s permission to enter into this new mortgage
  • The waiting period on a chapter 7 mortgage is only two years for an FHA mortgage where it is 4 years for a conventional mortgage


Debt To Income Ratios

What are the debt-to-income ratios?

Higher debt to income thresholds:

  • Conventional mortgages have a maximum debt-income ratio of 49.99% where FHA mortgages can get automated approval all the way up to 56.99% (back end ratio)
  • Many lenders will not allow this higher debt to income ratio FHA loans, but Gustan Cho Associates do not have any overlays for debt to income

This higher threshold may allow you to qualify for a higher payment, but we want to make sure you are not stretching your housing budget too far.

Manual Underwriting Versus Automated Underwriting System

Manual underwriting:

  • The FHA HANDBOOK is over 1000 pages
  • Part of this handbook will describe FHA manual underwriting guidelines
  • Most lenders do not participate in manual underwriting but once again we do
  • FHA MANUAL UNDERWRITING guidelines can be confusing; it is important to select a lender who knows the manual underwriting process
  • We are manual underwriting experts and can get your file to the finish line

Applying for a high balance FHA loan with Gustan Cho Associates is a simple process. First, call Mike Gracz on 630-659-7644. After a brief discussion with Mike, an application link will be sent to you from a licensed loan officer in your state. You will also need to gather the following documentation. Once you have completed the online application and sent in the required documentation, your loan officer will be able to pull your credit report and start the pre-approval process. Depending on your qualifications, we may need to use our TBD UNDERWRITING PROCESS.

Gustan Cho Associates are your FHA lending experts. Please subscribe to her YouTube CHANNEL to stay up-to-date with the ever-changing mortgage guidelines. We pride ourselves on customer service. We are available seven days a week, mornings and evenings. Please feel free to call us with any FHA mortgage questions. Call Mike Gracz directly on 630-659-7644. We look forward to earning your business.

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