FHA Jumbo
While a Federal Housing Administration loan is designed to accommodate first time buyers with low to moderate income, there are limits on how much you can borrow with this type of loan. These limits vary depending on real estate market in your area but are currently capped at $417,000 for most places in the country. FHA Jumbo loan considers those prospective buyers who want to borrow a larger amount.
This type of loan is ideal for a buyer with a high income who lives in an area where real estate prices make coming up with a full 20% down payment unrealistic. Markets like Hawaii, Los Angeles, and New York City, where property values are higher than other parts of the country are perfect examples of this.
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Key Advantages with this Type of Loan
One of the biggest advantages is that with the FHA Jumbo loan, you can put a minimum of 10% down on a property instead of the standard 20%. Another key factor in securing a loan is credit. The FHA Jumbo loan takes into consideration overall credit, not just the FICO scores. Therefore, while credit still matters, a good credit score isn’t as critical with this type of loan. Additionally, while most traditional loans won’t accept anything higher than 43% debt to credit ratio, there is a bit more leniency with an FHA Jumbo loan.
What are the Restrictions of an FHA Jumbo Loan?
Just like with the FHA loan, with the FHA Jumbo loan there is no cash-back at closing. Some buyers would like to borrow more than the price of the home and take cash back at closing for home improvements, paying off debts, or for personal use. With the FHA Jumbo loan this isn’t an option.
While the FHA Jumbo loan allows flexibility with the down payment amount, and is more lenient in considering credit, the price is often higher than a FHA loan. It’s understandable that a larger loan is a bigger risk to the lender, and therefore might be subject to a higher interest rate. The interest rate varies with each lender, so it’s beneficial to compare prices before settling on a loan.
Although this is a variation on the standard FHA loan, there are still limits to the amount that the buyer can borrow. Loan limits are determined based on the geographic location of the property. Currently, for a single-family dwelling, the loan may not exceed $729,750. This is still a significantly larger amount than the standard FHA loan allows, and if you plan to purchase real estate in a higher priced market, this type of loan would be a good option to consider.
