Jumbo Loans: FHA vs Conventional Home Financing
It’s no secret that the U.S. Housing market has recovered significantly since the late 2008 financial collapse.
However, while the recovery of the housing market is fantastic news for existing homeowners, it’s no secret that rising house prices can make it much more difficult for first-time home buyers and to put their first foot forward on the property ladder.
Understanding Jumbo Loans & Conforming Mortgage Limits
Every year, the Federal Housing Financing Agency sets maximum conforming mortgage limits on home loans backed by Fannie May and Freddie Mac. These limits set the benchmark for how much conventional lenders across the U.S. will usually lend property buyers. Moreover, as of 2017, the average maximum loan amount offered to people looking to purchase a single family home is capped at $417,000.
There is only one problem. When people need access to greater home loan amounts, they are subsequently forced to seek out non-conventional, jumbo home mortgage lenders. What’s worse, qualifying for a non-conforming mortgage can require an almost perfect credit score and significant existing capital which can be used as a down payment on a property.
How FHA Max Loan Limits help Provide a Second Jumbo Mortgage Option
The good news for people looking to buy property in high-cost areas in the United States is that there is now an FHA alternative to traditional jumbo mortgage lending. This is because FHA max loan limits currently stand at $636,150 and for all intents and purposes can be considered jumbo mortgages in their own right.
Advantages of FHA Jumbo Loans
When it comes to FHA vs conventional financing, the benefits are simple. Even borrowers with strong financials can take advantage of 3.5% down payment opportunities. At the same time, people with poor credit in high-cost areas, benefit from a reduced potential for them to be priced out of their local communities.
FHA Jumbo Loan Disadvantages
While FHA jumbo home loans provide a fantastic alternative to other jumbo home loans, their main drawback rests with the fact that their availability depends completely on where individuals looking to borrow are located. In Sacramento California, for example, maximum FHA loan limits currently stand at $488,750. This being the case, people looking to benefit from the FHA maximum loan amount will often need to look for real estate in surrounding areas which is still located within commuting distance to their workplace and family infrastructure.