FHA Jumbo Loans Mortgage Guidelines In High Cost Areas

This BLOG On FHA Jumbo Loans Mortgage Guidelines In High-Cost Areas Was UPDATED And PUBLISHED On March 21st, 2020

What are the FHA Jumbo guidelines for mortgage loans in high-cost areas?

FHA Loans are the most popular mortgage loan programs in the U.S.

  • HUD, The U.S. Department of Housing and Urban Development, is the parent of the Federal Housing Administration (FHA). FHA is not a lender and does not fund FHA Loans
  • FHA Mortgages are home loans for owner-occupant borrowers originated and funded by banks and private lenders. FHA’s role is to insure
  • FHA Loans in the event borrowers that default on them
  • FHA will insure banks and private lenders for the loss due to the defaulted FHA Loan if it goes into foreclosure
  • Because of the government guarantee, lenders can offer low-interest rates with low down payment requirement on FHA Loans

In this article, we will discuss and cover FHA Jumbo Loans Mortgage Guidelines In High-Cost Areas.

FHA Loan Limits

Government Loan Programs such as FHA as well as Conventional Loans (FANNIE MAE/FREDDIE MAC) have maximum mortgage loan limits.

  • Every year, the Federal Housing Finance Agency sets the maximum conforming loan limits for home loans which are backed by Fannie Mae and Freddie Mac
  • Maximum conforming loan limits is currently is set at $510,400 for single-family units
  • Conforming Loan Limits are higher on 2 to 4 units and on high-cost areas
  • Alaska and Hawaii have single-family loan limit caps set that are much higher
  • Many counties in California, conforming and FHA Loans limits are higher than the standard $336,760 loan limit on single-family homes
  • Conventional Loans are often referred to as conforming loans because they need to conform to Fannie Mae and/or Freddie Mac Mortgage Guidelines
  • FHA Loan Limits in most U.S. counties is capped at $336,760
  • FHA Loan Limits are higher in high-cost areas

For example, many counties in California have FHA Loan Limits capped higher than the FHA loan limit of $336,760 where it is called FHA Jumbo Loans.

What Are Non-Conforming And FHA Jumbo Loans

What Are Non-Conforming And FHA Jumbo Loans

Mortgage Loans that exceed conforming loan limits are often referred to as non-conforming loans and Jumbo Loans.

  • Home Buyers now have options with larger sized loans which includes conventional and FHA Jumbo Loans
  • FHA Jumbo Loans are higher loan sized residential mortgages backed by the Federal Housing Administration
  • There are many advantages of FHA Jumbo Loans

Benefits And Negatives Of FHA Jumbo Loans

One of the biggest benefits with FHA Jumbo Loans is the smaller down payment required on a higher-priced home purchase.

  • HUD requires 3.5% down payment on home purchases, whether it is a traditional or FHA Jumbo Loans
  • Since FHA Jumbo Loans is guaranteed by the government, mortgage interest rates are lower than Conventional loan programs or Jumbo Mortgages
  • The downside of FHA Jumbo Loans is that borrowers are required to pay Mortgage Insurance Premium of 0.85% annually for the term of a 30 year fixed rate loan
  • There is also a one time 1.75% upfront FHA Mortgage Insurance Premium that needs to be paid
  • But that amount can be rolled into the balance of the FHA Loan
  • FHA Guidelines On Debt To Income Ratios are much less strict than Conventional and Jumbo Mortgage Programs
  • FHA allows up to 46.9% front end and 56.9% back end debt to income ratios
  • Fannie Mae maximum debt to income ratio is 50% DTI to get an approve/eligible per AUS
  • Freddie Mac can go up to 50% DTI to get an AUS Automated Approval

Most Jumbo Mortgage Lenders will cap DTI at 43% or less.

FHA Guidelines On Credit Scores

What are the FHA guidelines for credit performance

FHA is much more lenient on minimum credit score requirements than Conventional and/or Jumbo Mortgage Loans.

  • Minimum credit scores required on FHA Loans is 580 credit scores for a 3.5% down payment home purchase loan
  • Borrowers with credit scores between 500 and 579 FICO can qualify for FHA Loans
  • However, borrowers with under 580 FICO, 10% down payment is required
  • Conventional Loans require a minimum of 620 credit scores

Jumbo Mortgage Lenders normally require a 700 FICO.

Waiting Period After Bankruptcy And Foreclosure To Qualify For Mortgage

Government, Conventional, and Jumbo Loans have waiting period requirements to qualify after bankruptcy and foreclosure. NON-QM Loans and Bank Statement Mortgage Loan Programs do not have any waiting period requirements after bankruptcy and foreclosure.

  • HUD and VA requires a 2-year waiting period after Chapter 7 Bankruptcy to qualify for VA, USDA, and FHA Loans
  • HUD, USDA, and VA allows borrowers who are in Chapter 13 Bankruptcy repayment plan to qualify for USDA, VA and FHA Loans with Chapter 13 Bankruptcy Trustee Approval
  • There is no waiting period to qualify for USDA, VA and FHA Mortgages after Chapter 13 Bankruptcy discharged date
  • There is a four-year waiting period to qualify for conventional loans after bankruptcy, deed in lieu of foreclosure, and short sale
  • There is a seven-year waiting period to qualify for conventional loans after the recorded date of a standard foreclosure
  • There is no waiting period to qualify for NON-QM Loans after bankruptcy and foreclosure
  • NON-QM Loans and Bank Statement Mortgage Loans For Self Employed Borrowers require 20% down payment
  • Jumbo Bank Statement Mortgage Loans for Self Employed Borrowers require 24 months bank statements and the deposits of 24 months are averaged and used as monthly income

Home Buyers interested in knowing more about FHA Jumbo Loans contact us at 1-262-716-8151 or text us for a faster response.  Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.

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