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FHA Jumbo Loans
What are FHA Jumbo Loans?
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6 Replies
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An FHA jumbo loan is a type of mortgage loan that allows borrowers to take out a loan amount higher than the conforming loan limits set by the Federal Housing Administration (FHA), while still taking advantage of FHA’s more lenient credit and down payment requirements.
Here are some key points about FHA jumbo loans:
- Loan Limits: FHA jumbo loans exceed the standard FHA loan limits, which are set by county and vary across the country. For most areas in 2023, the FHA loan limit is $498,257 for a single-family home.
- Higher Loan Amounts: FHA jumbo loans can range from the local FHA limit up to a maximum of $1,149,825 in most high-cost areas. This allows borrowers to purchase more expensive properties.
- Down Payment: Like regular FHA loans, FHA jumbo loans require a minimum down payment of 3.5% of the purchase price.
- Eligibility: Borrowers must meet standard FHA credit and income requirements, including a minimum credit score (typically 580+) and debt-to-income ratios within FHA guidelines.
- Mortgage Insurance: FHA jumbo loans require borrowers to pay an upfront mortgage insurance premium (MIP) and annual MIP, just like regular FHA loans.
- Loan Purpose: FHA jumbo loans can be used for purchasing or refinancing primary residences, as well as certain multi-unit properties.
The main advantage of an FHA jumbo loan is that it allows borrowers who may not qualify for a conventional jumbo loan (due to credit or down payment constraints) to secure a larger loan amount with FHA’s more lenient underwriting standards. However, the mortgage insurance premiums can make FHA jumbo loans more expensive over time compared to conventional options for well-qualified borrowers.
FHA jumbo loans provide an alternative for homebuyers seeking higher loan amounts in more expensive housing markets while taking advantage of the flexibility offered by the FHA program.
https://gcaforums.com/fha-loan-limits/
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This reply was modified 6 months, 2 weeks ago by Peter.
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Can you explain more in detail about FHA Jumbo Loans or High-Balance FHA Jumbo Loans? The down payment requirements, the debt-to-income ratio, the credit and income guidelines, and the difference between FHA jumbo versus traditional FHA loans?
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FHA Jumbo Loans or High-Balance FHA Jumbo Loans
Synopsis
Loans guaranteed by the Federal Housing Administration (FHA) that exceed established conforming loan limits are referred to as FHA Jumbo Loans. These loans were created to help people in high-cost areas purchase more expensive homes.
Down Payment Requirements
Typical FHA Loan: Usually requires a 3.5% down payment.
FHA Jumbo Loan: The down payment for high-balance loans is generally 3.5%. However, lenders may ask for a slightly higher percentage based on the risk associated with the size of the loan itself and other factors.
Debt-to-Income Ratio (DTI)
Standard FHA Loan: DTI is usually capped at 46.9% front-end and 56.9% back-end. Manual Underwriting can be made up to 40% front-end and 50% back-end if two strong compensating factors exist.
FHA Jumbo Loan: The DTI rules are similar but could be stricter depending on specific lender requirements; given that the amount borrowed is larger, the lender will prefer a lower DTI.
Credit and Income Guidelines
Credit Score:
Standard FHA Loan: The 3.5% down payment option requires a minimum credit score of 580. A ten percent down payment is required for scores between 500 and 579.
FHA Jumbo Loan: This loan typically requires a higher credit score around—often around or greater than—620, based on what the lender deems risky behavior by the borrower who wants a bigger loan amount secured against his property asset, such as a house, apartment building, etcetera.
Income Documentation:
Standard FHA Loan: Full income documentation such as tax returns, W-2s, and pay stubs are required.
FHA Jumbo Loan: This requires similar documentation but might require additional proof due to larger loan amounts being borrowed.
Differences Between FHA Jumbo and Traditional FHA Loans
Loan Limits:
Traditional FHA Loan: Conforming loan limits vary by county and tend to be lower; in 2024, they were $498,257 for single-family homes in most areas.
FHA Jumbo Loan: These go above these standard limits. Single-family homes located in high-cost areas can reach up to $1,149,250.
Down Payment:
Both types of loans often require a 3.5% down payment; however, the lender may decide to require more money down for high-balance loans.
Interest Rates:
Traditional FHA Loan: Lower interest rates are typical due to lower loan amounts and associated risks.
FHA Jumbo Loan: Slightly higher interest rates may be experienced because of larger loan sizes and the increased risk lenders face when providing such funds for borrowers who want them secured against property assets like houses, apartments, buildings, etcetera.
Qualification Requirements:
Traditional FHA Loan: Easier to qualify for because they have more forgiving credit and income requirements.
FHA Jumbo Loan: Since these types of mortgages involve borrowing much larger sums, more stringent qualifications are needed. This includes higher credit scores and stronger income verification methods employed by lenders who offer them as part of their product range.
Mortgage Process for FHA Jumbo Loans
Pre-Qualification:
The lender performs an initial evaluation by examining the borrower’s financial situation to determine whether they might be eligible under certain conditions (Income level).
Application:
Submit a detailed loan application, including necessary supporting documents like pay slips, etc., to show the ability to repay and intent to use borrowed funds wisely.
Property Assessment:
To determine the highest possible amount of money that can be loaned for a mortgage, an appraiser evaluates the fair market value based on different factors like location desirability, size, number of rooms, age condition, overall appearance, etc., used in the underwriting process. This value is then utilized to identify the maximum loan amount allowed.
Mortgage Underwriting.
The insurance company reviews transaction risks against set standards to decide whether to insure them.
Approval: Loan approved or declined
Closing: This is when ownership changes hands between seller and buyer through conveyancing, a legally binding contract. Solicitors representing both parties (buyer and seller) exchange necessary documents, including title deeds, etc., while will.
Disbursement – Money paid out to complete the purchase of the property.
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Of course! I am happy to provide more information about FHA Jumbo Loans or High-Balance FHA Loans. These loans are for borrowers in high-cost areas whose home prices exceed the standard FHA loan limits.
FHA Jumbo Loans Compared to Traditional FHA Loans:
The main difference is in the loan amount, where FHA Jumbo Loans exceed the standard FHA loan limits within a given area but still fall under the maximum limit set by the Federal Housing Administration (FHA) for these loans in high-cost areas.
Key features of an FHA jumbo loan include:
Down Payment Requirements:
- Minimum 3.5% down payment for credit scores above 580.
- 10% down payment for credit scores between 500-579.
- This is similar to traditional FHA loans; however, it will be higher because the loan size is bigger.
Debt-to-Income Ratio (DTI):
- They are normally capped at 46.9% front-end and 56.9% back-end on Automated Underwriting System-approved files.
- ManualManual underwriting can be up to 40% front-end and 50% back-end, with two compensating factors, such as a higher credit score and a larger down payment.
- Just like traditional FHA loans.
Credit Score Guidelines:
- Minimum of 500 (with 10% down).
- 580 or higher with a 3.5% down payment.
- Some lenders may have higher minimums for jumbo amounts.
Income Guidelines:
- Must show stable and reliable income.
- Typically, one needs two years of employment history.
- Self-employed borrowers usually require two years of tax returns.
Loan Limits:
- They differ from county to county.
- In one-unit properties, Federal Housing Administration, the national low-cost area mortgage limits are $498,257 for 2024.
- The national cap on FHA high-balance loans is $1,149,825 for one-unit properties in high-cost areas.
- The same applies here: anything over this limit but below their high-cost area mortgage limit would qualify as a “jumbo” Federal Housing Administration-backed loan.
Property Types:
- Single-family homes
- Multi-unit properties (up to four units)
- Condos (need to be approved by the Federal Housing Administration)
- Manufactured homes (with restrictions)
Mortgage Insurance:
- The Upfront Mortgage Insurance Premium (UFMIP) is 1.75% of the loan amount. Depending on the term and LTV, the annual MIP is 0.55% of the loan amount.
Interest Rates:
- Usually in line with conventional jumbo loans.
- However, because these loans are for larger amounts, interest rates may be slightly higher than those charged on standard FHA loans.
Occupancy:
Owner-occupied primary residence only
Refinancing Options:
Available through Federal Housing Administration Streamline Refinance (with restrictions)
Differences from Traditional FHA Loans:
Loan Amount: Bigger than standard Federal Housing Administration loans.
Property Values:
Targetted at high-cost areas
Lender Availability:
Fewer lenders provide Federal Housing Administration jumbo mortgages
Underwriting on FHA High-Balance Loans:
It may have more rigid underwriting requirements due to the greater borrowed sum involved.
Documentation:
This could necessitate extensive documentation
Processing Time on FHA Jumbo Loans:
It can take longer due to bigger loan sizes, which require more complex underwriting procedures.
Closing Costs: They might be higher based on a larger loan amount
Key Benefits of FHA Jumbo Loans:
- Lower down payment relative to conventional jumbo mortgages.
- More lenient credit requirements compared to traditional jumbos.
- Allows for higher DTIs than many non-jumbo conforming loans.
- Easier qualifying standards vs. other similar-sized mortgage options.
Considerations:
Mortgage insurance is required throughout the life of the loan if less than 10% down. The property has to meet FHA standards. Even though it is a high-cost area, the laws and regulations governing these programs still set limits.
Remember: Although the Federal Housing Administration sets general rules for all its products, each lender can add extra conditions, especially when dealing with larger sums of money like those in this category. Always shop around and compare offers from different companies before deciding.
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This reply was modified 4 months ago by Gustan.
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I would like more information on all specific aspects of FHA Jumbo Loans?
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This is everything I know about FHA Jumbo Loans:
Loan Limits:
Change each year based on middle home prices:
FHA Loan Limit in Median Priced Areas of the United States for 2024:
- 1-unit: $498,257
- 2-unit: $637,950
- 3-unit: $771,125
- 4-unit: $958,350
Differ depending on county and property type (1-4 units)
FHA Loan Limit in High-Cost Areas of the United States:
These are the FHA high-cost area limits for 2024:
• 1-unit: $1,149,825
• 2-unit: $1,472,250
• 3-unit: $1,779,525
• 4-unit: $2,211,600
Down Payment:
If the credit score is 580 or higher, then the minimum is 3.5%
10% if the credit score is between 500-579
Can be from family members or eligible non-profits
Credit Score Requirements:
Absolute minimum: 500
Minimum for 3.5% down: 580
Many lenders have higher minimums (620-640) for jumbo loan amounts as part of lender overlays.
Debt-to-Income Ratio (DTI):
- Front-end DTI (housing expenses): Usually capped at 46.9%.
- Back-end DTI (all debts): Normally capped at 56.9%.
- It can go up to 40% front-end and 50% back-end on manual underwriting with compensating factors.
Income Verification:
- Usually, you need two years of steady employment history.
- Self-employed borrowers usually need two years of tax returns.
- Multiple income types are accepted (salary, hourly, commission, etc.).
Property Requirements:
- Must be a primary residence.
- Allowed property types include one to four units.
- Must meet FHA property standards.
- Condos must be FHA-approved.
Mortgage Insurance:
- Upfront Mortgage Insurance Premium (UFMIP).
- Charged as a percentage of the loan amount – usually around 1.75%.
Annual MIP: Varies based on loan term and LTV ratio – 0.55%.
MIP duration:
- It lasts for life on loans with down payments below or equal to ten percent.
- For others, it ends after 11 years.
Interest Rates:
- Competitive with conventional jumbo loans.
- It can be fixed or adjustable.
Loan Terms:
- 15 or 30-year terms are the most common.
- Some lenders offer 20 or 25-year terms.
Closing Costs:
- Similar to standard FHA loans, they may be higher due to the larger loan amount.
- It can be partly covered by seller contributions (up to six percent of the sales price).
Appraisal Requirements:
- It would help if you used an FHA-approved appraiser.
- Property must meet FHA’s Minimum Property Requirements (MPR).
Occupancy Requirements:
- Must be owner-occupied within 60 days of closing.
- Must remain primary residence for at least one year.
Refinance Options:
- FHA Streamline Refinance is available after six months.
- FHA Cash-Out Refinance is available after twelve months.
Assumability:
Lender approval is required to assume FHA loans, including jumbos.
Bankruptcy and Foreclosure Waiting Periods:
Chapter 7 Bankruptcy: Must wait two years from discharge date.
Chapter 13 Bankruptcy: May qualify after one year of on-time payments under certain circumstances.
Foreclosure: Three years must pass before you can get approved again.
Eligible Borrowers:
U.S. citizens
Permanent residents
Non-permanent residents with valid work authorization
Co-borrowers:
Non-occupying co-borrowers allowed (with restrictions)
Cash Reserves:
Typically, they need one to two months of mortgage payments in reserve
May require more reserves for three and four-unit properties
Employment:
A minimum of two years of continuous employment history is generally required.
It may qualify with strong compensating factors if it is under two years old.
Debt Payoff for Qualification:
Allowed on debts being paid off to meet qualification requirements; not permitted with all types of mortgages, though, so check first!
Student Loans:
Counted in DTI even if in deferment; calculated as follows – use greater than one percent of the loan balance or actual payment.
Manual Underwriting:
Available for borrowers with no credit score or non-traditional credit; additional requirements apply.
Energy Efficient Mortgage (EEM):
It can be used in combination with FHA Jumbo for energy-efficient improvements.
Renovation Options:
Can be combined with the FHA 203(k) program for home improvements
Seller Concessions:
- You are limited to 6% of the sales price.
- You can only use seller concessions for closing costs, not down payments.
Remember that while these are FHA guidelines, individual lenders may have stricter requirements, especially regarding jumbo loan amounts. Always shop around and compare offers from multiple FHA-approved lenders.
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