Jumbo FHA Loans

The Department of Housing and Urban Development oversees the FHA and they set the guidelines and loan limits for FHA loans. They determine what the qualifications are and also which loan amounts fit into the standard limits and what Jumbo sized loans are allowed.

What are Jumbo FHA Loans?

A Jumbo FHA loan is considered to be any FHA approved loan amount that is above the standard limit of $331,760. You may be able to purchase a higher priced home with an FHA insured loan and a down payment of just 3.5%.

For both conforming and FHA loans, there are also high cost areas where the loan limits are higher. The standard FHA loan limit is set at $331,760 and up to a maximum of $765,600 for a single family home in a high cost area.

The Department of Housing and Urban Development oversees the FHA and they set the guidelines and loan limits for FHA loans. They determine what the qualifications are and also which loan amounts fit into the standard limits and what is considered to be Jumbo.

For more information on loan limits, read our article on FHA loan limits and try our FHA loan limits lookup tool.

FHA Loan limits vs conventional loan limits

HUD has set loan limits for FHA loans and although the standard limit of $331,760 is lower than the conventional limit of $510,400.

When it comes to the maximum loan amounts, FHA loans have a ceiling depending upon the number of units and the county where the property is located. However, conventional loans turn into Jumbo loans once the loan amount surpasses the conforming loan amount for the area.

Lenders then have the ability to impose their own maximum loan amounts that could be much higher than the maximum amount for an FHA loan. However, they will have a larger down payment requirement.

Jumbo FHA Loan Requirements

The requirements to qualify for a Jumbo FHA loan are essentially the same as any other FHA loan regardless of its size. However,

• Credit scores – Credit score requirements begin at 500
• Down payment – The down payment is 3.5% for credit scores of 580 or higher and 10% for scores of 500-579.
• DTI – The standard DTI requirement is 43% but FHA guidelines will allow for much higher DTI with compensating factors.
• Two appraisals in a declining market – For FHA Jumbo loans, lenders may require two appraisals in a declining market to verify the home value.
• Reserves – Reserves of 2-3 months may be required

Lender Overlays for Jumbo FHA Loans

Lenders have the ability to impose tighter guidelines or requirements as they take on more risk. These additional requirements are called lender overlays. As the loan size increases, so does the risk factor for the lenders and as a result they may add overlays.

Some of the most common examples of overlays added for Jumbo FHA loans are additional reserves and lower DTI requirements. These two overlays give lenders additional assurance that the borrower has the ability to repay the loan.

Jumbo FHA Loan Rates

The jumbo FHA loan rates today are extremely competitive and are likely lower than traditional jumbo rates if you have good credit. Jumbo mortgage rates are typically a bit higher than their lower conforming counterparts. Meanwhile, while comparing rates you must consider that FHA loans also have mortgage insurance. That additional monthly cost must be factored into your analysis.

Mortgage rates often change multiple times per day. Plus, factors such as your credit score play a major role in your final rate. As a result, it would be virtually impossible to keep this article updated with rates that represent your reality. If you would like a rate quote, please complete this short form and one of our lenders will contact you for a jumbo FHA rate quote without pulling a credit report.

Jumbo FHA Down Payment Assistance

FHA guidelines permit down payment assistance to be used in lieu of the borrower’s own funds for the down payment. However, down payment assistance is not permitted for loan amounts over $484,350 which is the standard FHA loan limit.

If you believe you may fall short on cash to purchase a home, then read our article on FHA down payment assistance programs for more information.

Pros and Cons of a Jumbo FHA Loan

Pros

• • Small down payment requirement
  • Low credit scores accepted
  • Available for multi-family homes
  • Lower interest rates than a traditional Jumbo loan

Cons

• • FHA mortgage insurance is required for the life of the loan
  • There is a maximum loan amount set for each county

Difference between an FHA Jumbo Loan and a Standard Jumbo Loan

The main difference between a jumbo FHA loan and a standard jumbo loan are as follows:

• FHA loans have strict qualification requirements
• FHA loans have mandatory mortgage insurance regardless of the down payment
• Standard jumbo loans can go into the millions while FHA loans are capped at a maximum amount
• FHA loans have inspection guidelines that must be met
• Standard jumbo loans typically have higher interest rates than FHA loans

Summary

Purchasing a more expensive home with an FHA loan may be the right option for you if you have a small down payment or less than optimal credit scores. The lenders in our network are able to help you regardless of whether you choose an FHA loan. Complete this short loan inquiry form to have a quick discussion with a lender about your options.

Related Articles

FHA Loan Limits – This article will outline all of the FHA loan limit options for Jumbo loans in your county

FHA Loan Requirements – Learn about all of the standard requirements for an FHA loan today