Although the Federal Housing Administration (FHA) is widely known for helping low and moderate-income buyers purchase or refinance their primary residence, changes have been made that allow the FHA to back loans with higher amounts than before. Often known as FHA Jumbo Loans, these mortgages have higher caps, allowing borrowers in high-cost areas to buy or refinance their homes, while still enjoying the benefits of FHA mortgage loans. FHA Jumbo Loans are less common than standard FHA home loans, and usually come with higher interest rates.
A jumbo loan is a loan that exceeds the limit set by Fannie Mae and Freddie Mac. These caps limit the maximum mortgage amount that lenders can purchase. Borrowers who need to obtain a loan higher than this limit will pay a higher interest rate for a jumbo loan than a loan that conforms to FHA limits. The limit for standard FHA single-family home loans is $417,000, and higher for multi-family properties.In areas like New York or Los Angeles where the cost of living is higher, the limit for a conforming mortgage is $625,000.
FHA Jumbo Loans give buyers the power to purchase homes with low down payments in comparison to conventional jumbo loans. Even though borrowers must have higher credit scores to qualify, FHA Jumbo Loans offer many benefits including:
Jumbo loans can come in the form of a conventional mortgage or an FHA insured mortgage. Limits for FHA loans have been raised to:
Jumbo Mortgage loans usually have a higher interest rate due to the increased risk to the lender. Rates for FHA Jumbo loans are slightly higher than conforming FHA loans (mortgages that are less than or equal to $417,000). Also, keep in mind that the loan limits are dictated by the geographic location of the property. These guidelines are regulated by the US Department of Housing and Urban Development (HUD). Rates for FHA Jumbo loans are also slightly higher than conforming FHA loans (mortgages that are less than or equal to $417,000).