Today's Mortgage Rates

We are starting to see more and more people willing to “step up” and finance more than the typical FHA loan – they are called FHA jumbo loans.

Depending on where you live, currently FHA will allow you to finance up to $729,000 with just 3.5% down? This product was part of the legislation passed by congress and chances are that it won’t be around forever. It was a special program that was created by HUD and it could go away at any time.

So if you are shopping for a house in a market where FHA jumbo loans are allowed, be sure to ask your loan officer if this is an option that is available for you. Many people that I talk to are finding that the price declines in areas like California, Arizona, Nevada and Florida for homes over $500,000 have been much steeper than those homes that are priced under $250,000.

That million dollar home in 2006? Chances are that it is now selling for $500,000 and can qualify for a FHA jumbo loan.

Basic FHA jumbo loan guidelines include:

• Up to $729,000 financed. (based on the county loan limits published by HUD)
• 660 FICO score required.
• 3.5% down payment.
• 30 year fixed rates around 5%

So if you are thinking of selling your existing home and moving up, the FHA jumbo loan product may fit your overall financing objectives.  FHA jumbo loans are done by FHA lenders who do regular FHA loans and generally take about the same amount of time to get closed as an FHA loan.  Some lenders require 2 appraisals for FHA jumbo loans, but not all lenders do.

FHA loans are one of the most popular loans with borrowers today – and not just because they are insured by the federal government from default.  Wait – you don’t think that that helps you if you are a borrower, do you? It doesn’t.  A few of the people that I speak with about FHA loans think that the FHA insured loan will benefit them somehow – but the fact that a loan is insured by FHA actually does the borrower no good. FHA insures the loan in the event of a default by the borrower, the lender gets paid from the FHA insurance fund.  Sorry for the bad news on this one, but at least we were able to clear up that confusion.

So FHA loans are popular because they have a low down payment, relatively flexible underwriting guidelines and low fixed rates — among a few other reasons. When people ask me what the advantages are to an FHA loan, here are just a few of the things that I talk about as to why an FHA loan may be right for them:

• FHA requires a 3.5% down payment as opposed to at least a 5% conventional loan down payment
• The closing costs and down payment can be a gift from a relative (or employer)
• There are higher debt to income ratios allowed when qualifying
• A higher loan to value ratio is allowed with FHA loans
• FHA still allows a cash-out refinance of up to 85% loan to value
• The UFMIP can be financed into the loan
• There is never a prepay penalty on an FHA loan
• The seller may contribute up to 6% on a FHA loan

There may be a few other advantages when getting an FHA loan – but these are some of the simple ones that seem to come up in conversation all the time when speaking with borrowers about them.

Oh, and now we are all clear on the FHA insurance thing — and who exactly it benefits: the lender.