Link to this page Print RSS  

How Recent FHA Guideline Changes Have Impacted Jumbo Loans

06/16/2010
Standards recently put into place by the FHA could adversely affect larger-sized loans. But even if they do, jumbo loans will still be available. Although tighter government regulations and fears among the banking industry have made credit more difficult to get, buyers have been able to secure the financing they need to purchase new homes. For jumbo and super jumbo loans, they're finding help at local banks and smaller financial institutions.
 

New guidelines' effect on homebuyers

While FHA loans help those looking for homes, townhouses and condominiums that are priced within the FHA's qualifying guidelines, they present challenges for homebuyers who desire homes priced beyond those thresholds.

One advantage of an FHA home loan is a lower down payment requirement. Instead of the typical loan requirement of 10 to 20 percent, FHA loans require just 3.5 percent down. However, FHA's new guidelines require homeowners to have a credit score of 580 or greater to qualify for the 3.5 percent down payment.FHA loans also require mortgage insurance, which formerly was 1.75 percent of the loan value but under the new guidelines, is now 2.25 percent. That increase can add an additional $1,000 cost on a loan of $200,000. FHA's new guidelines reduce seller concessions, too.

New guidelines' effect on the mortgage industry
FHA loans have been the lifeline many first time home buyers have needed since the economic downturn began. FHA loans offer homebuyers the lowest interest rates on certain loans and access to credit lines. They have also helped borrowers qualify for loans which they would not have qualified for with conventional lenders.

But then there's the problem of the FHA's loan thresholds. Depending on the part of the country the home is located in, those threshold amounts range from a low of $400,000 to over $700,000. Since prices on many homes on the market today fall outside these threshold amounts, borrowers have no choice but to look beyond the FHA to fulfill their mortgage loan needs.

Where are the jumbo loans?
Lender fears have made jumbo loans difficult to get, and FHA loans with their lower qualifying criteria haven't helped those homebuyers looking to purchase higher-priced homes. The good news is, jumbo loans are out there. And if you're willing to look harder and possibly longer, chances are good you'll find one that suits your needs.

Link to this page Print RSS