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.

The Federal Housing Administration has found itself in a position where it needs to raise revenue or cut expenses in order to survive. In an effort to raise revenues, the House Financial Services Committee has passed a bill that would substantially raise the amount a borrower pays for FHA monthly mortgage insurance – from the .55% that is required today to 1.5%.

This wouldn’t be the first time that FHA has raised the insurance premiums for an FHA loan, but it usually seems like in the past they have raised the UFMIP (up front mortgage insurance premium) and not the monthly MI (mortgage insurance). Nonetheless, the proposed raise in FHA insurance could make getting an FHA loan a lot more expensive in the near future if the bill makes it through the full House of Representatives and Congress.

Should the insurance hike pass, what it means to the homeowners trying to get a loan is that it will be harder to qualify because of the increased costs. Higher insurance costs will increase the monthly payment and result in the ability of a borrower to finance a home because the increased debt ratio calculation. A higher mortgage payment while making the same money each month will result in it being more difficult to qualify for a mortgage.

There are other important changes to the FHA program in the bill as well such as FHA holding lenders more accountable for bad loans as well as increasing the authority of FHA to pull the approval of FHA approved lenders. While these items are also important to the FHA borrower, they just don’t seem (to me at least) to have as big of an impact on the ability of an FHA borrower to get a loan as higher insurance fees.

Because in today’s world – more than ever before – people are trying to stretch their dollars as far as they can.