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FHA Jumbo Loans and FHA Jumbo Mortgage Financing

Written by Jeff Hutchison, Mortgage Broker or Lender in Chicago

August 21, 2009 4:51 AM Financing in Chicago

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There has been much confusion over the FHA Jumbo Loan program and hopefully this will help answer some questions.

premium Jumbo Loans are still available in 2009 as part of the extended economic stimulus package, but are set to expire end of December 2009. These higher loan limits for FHA were created to allow financing for borrowers in areas considered "high cost area".

FHA itself was created in in order to stimulate home ownership for those potential home buyers with out enough premium to qualify for traditional bank loans. At that time the down payment required was 20% from a borrowers own funds, and loan terms were 15 years or less. With the creation of the FHA many average americans were able to afford to own a home with longer loan terms and as a result the housing market gained momentum. This allowed many potential buyers who had not saved for a downpayment to own a home. The FHA loan limit has grown consistently and is $271,050 in most areas of the country. The economic stimulus act passed by congress allowed for increased limits and created FHA Jumbo Loans.

Fannie Mae, Freddie Mac, and most lenders/banks are now tightening credit, requiring higher down payments, and hitting borrowers with charges for credit scores less than 720. This is eliminating many potential home buyers who can no longer afford the costs, rate increases, or have the necessary down payment. The lack of home equity loans allowing a combined loan to value ratio above 85% of the homes purchase price or market value has also eliminated many potential home buyers. FHA financing avoids many of those pitfalls and has become a viable financing option once again.

The FHA however does charge an upfront mortgage premium of 1.5% - 1.75% of the loan amount, and a monthly mortgage insurance premium at a factor of .5 - .55. These premiums are charged no matter how much the buyer puts down or what LTV or credit score they are at, unless they are taking out a 15 year loan in which case there is no monthly mortgage insurance premium with an ltv of 90% or less. These charges can be fairly substantial on an FHA Jumbo Loan. Those are the draw backs if you will to FHA financing.

FHA Jumbo Loans are FHA loans with loan amounts greater than $417,00 (this limit was $362,900 previously) and will allow financing up to 96.5% of the value of the property. The entire down payment can be a gift. The seller is allowed to contribute 6% towards closing costs and prepaids vs. conforming limit of 3% allowable seller paid costs above 90% loan to value ratio. FHA appraisals do not have to comply with the home valuation code of conduct which has killed many home purchases using conforming and conforming Jumbo financing.

Fannie Mae and Freddie Mac limit their conforming jumbo (loan amounts above $417,00 in high cost areas) financing to 80% - 90% of the value of the property depending on loan purpose and property type. 5% of the down payment at a minimum must come from the borrowers own funds sourced and seasoned for 2 months. Seller contributions are limited to 3% of the purchase price with an ltv greater than 90% ltv and the appraisal must comply with the home valuation code of conduct.

FHA Jumbo loans do not have the credit score requirements of conforming jumbos and do not have the credit score charges of Fannie Mae for scores under 720. Most lenders/banks now charge for credit scores less than 660 of .25 points on FHA financing. Most lenders also will give a break to applicants with credit scores over 720 - typically .25 rebate. There are no additional rate add ons or charges for cash out refinances. FHA Jumbo cash out refinances are limited to 85% of the value of the home.

******Many lenders do however require a 660 score for FHA loan amounts greater than $417,000 but some lenders still only require a 620 middle score for the FHA Jumbo loan program.

FHA will allow up to a $729,750 base loan amount in some high cost areas. FHA Jumbo loans in All areas allow the up front mortgage insurance premium of 1.5% - 1.75% to be financed on top of that. The loan limit will depend on the county in which the subject property is located. This link to hud will give loan limits by county for every state.

https://entp.hud.gov/idapp/html/hicostlook.cfm

Our current rates for FHA Jumbo Loans are:

5.5% - 30 year fixed FHA Jumbo

4.25% - FHA Jumbo 5/1 arm

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Please visit http://www.mychartermtg.com/FHA-Jumbo-Rates.html for more information.