FHA Jumbo Loan Program
The Federal Housing Administration (FHA) assists borrowers of modest means to buy and refinance a primary residence. In high cost areas, such as Fairfield County, the FHA helps borrowers obtain mortgages that exceed the conventional and conforming loan limits of $453,100. Mortgages over that amount are considered non-conforming, or jumbo, and an FHA jumbo mortgage is what may be needed to buy in Fairfield County.
Why an FHA Jumbo loan?
- High Loan Limits: While conforming loan limits are $453,100 in Fairfield County, the limits for FHA jumbo loans are:
- $601, 450 for single family home
- $769,950 for 2-unit property
- $930,700 for 3-unit property
- $1,156,650 for 4-unit property
- Smaller Down Payments: The down payment can be substantially lower than you’d be required to pay for most other types of jumbo mortgages. FHA jumbo down payments can be a low as 3.5% compared with 20% for conventional loans. On a $500,000 home, that’s the difference between a $17,500 down payment with FHA jumbo as opposed to $100,000 down payment with most other loans. The downside is you’ll be required to pay for mortgage insurance however FHA mortgage insurance is generally lower than conventional and along with a lower rate, it may still be more attractive than a conventional mortgage.
- High Debt-to-Income Ratio: Your debt-to-income (DTI) compares the amount of debt you have to your overall income. A low DTI demonstrates you have a good balance between debt and income; a high DTI shows that you have too much debt for your income. Conventional mortgages like to see a DTI of 36% or lower. FHA has more flexible standards with 43% usually being the cutoff.
- Lower Credit Scores: In general, credit requirements for FHA loans tend to be more relaxed than those for conventional loans. FHA loans require a minimum credit score of 580 and if your score is lower, you may still qualify with 10% down payment. Conventional loans require credit scores closer to 650.
Kristina L. Refsbeck