Section 5: FHA High Balance (Jumbo) Loans
FHA High Balance Loans
New FHA / HUD Guidelines will insure new increased loan amounts based on your county and state. That means you can take advantage of new maximum loan limits for FHA loans. High balance FHA loans are extremely popular with first time home buyers. There are two basic reasons for this. The first being the low-down payment required of just 3.5% of the sales price. The second is somewhat relaxed credit guidelines for FHA loans. Easier qualifying and lower down payment make it a magnet for first timers. FHA loans can be used to finance a primary residence but cannot be used to finance a rental property or second home. FHA loans also carry a guarantee to the lender in the instance of loan default. Should an FHA loan go into foreclosure the lender is compensated for the loss. This added feature helps lenders relax credit guidelines somewhat due to this guarantee. The guarantee is financed by two separate forms of mortgage insurance, an upfront mortgage insurance premium and an annual premium that is paid in monthly installments.
FHA High Balance Loan Requirements
While service requirements remain the same, FHA high balance credit and income requirements are typically more stringent compared to a conforming FHA loan. Additionally, FHA high balance rates may differ slightly -- but every lender is different.
FHA High Balance Loan Credit Score Requirements
Minimum credit scores for FHA loans start at 580 with a minimum down payment but can go lower if the buyers put down more. Lenders will check there is a record of at least two years of employment history and ask for copies of the most recent paycheck stubs covering a 30-day period. There are other qualifying guidelines, but these are the main ones. Your loan officer will provide a list of items needed when you submit your application. Standard FHA guidelines and regulations apply, yet many lenders do require a 580 FICO score. For greater loan amounts on purchases, minimum FICO scores increase to 600 on Purchase, Rate / Term refinances and to 640 on cash-out refinances.
FHA High Balance Loan Down Payments
You can take some of the pressure off by making a big down payment. If you put down more than 20%, lenders might be more forgiving about things like your credit score or debt–to–income ratio (DTI). But, if that’s not possible, expect to need excellent credit, not too much existing debt, and decent cash reserves. (Cash reserves are liquid funds left over after you’ve made the down payment and closing costs, which could be tapped to cover mortgage payments in an emergency.) Obviously, the more you’re borrowing and the lower your down payment, the tighter your lenders’ qualifying criteria are likely to get. Overall, Conventional jumbo loan guidelines vary depending on the lender, the size of the loan and other factors. Qualifying customers can now apply for an FHA High Balance Loan up to the maximum allowed by FHA. You can apply for a home loan with 3.5% down under new FHA loan limits.
Talk with an Orbit Home Loan specialist if you're considering a High Balance Loan.
Are High Balance mortgage rates higher?
Traditionally, jumbo loans have slightly higher interest rates than those on conventional mortgage loans. But that’s not always the case. Indeed, on the day this was written (in mid–August 2021), Bankrate’s survey showed average jumbo rates actually lower than FHA lones. And we quickly found a big–name lender offering the exact same rate for both loans. As with all mortgage products, lenders assess your riskiness as a borrower when deciding the rate, they’ll offer you. And some are more forgiving than others. So, you should shop around between lenders to find your lowest mortgage rate and best deal, regardless of the type of loan you want.
Conventional High Balance Loans v. Traditional Loan
(CHART)
Talk with an Orbit Home Loan specialist if you're considering a High Balance Loan