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New FHA Regulations and the Impact on the Jumbo Loan Market

By J Chase

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Published: 29Jan2010
Word count: 459
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These new standards could have potentially damaging effects on larger loans, but that does not mean those loans will no longer be available. While government restrictions and banking fears have restricted credit, people are still purchasing homes and finding ways to finance their home purchases. Lenders that are off the beaten path (such as local banks) and banks that are not located on Wall Street are great potential sources for jumbo loans and super jumbo loans.

Home Buyer Challenges The major headache for home buyers is that FHA loans open the door for lower priced homes, condos and town homes, but really make it difficult for homes that are outside the price threshold set by the government agencies.

With an FHA loan, a home buyer can put down just 3.5 percent as a down payment, instead of the typical 10 percent or 20 percent, but they must buy mortgage insurance. With the new guidelines for FHA backed mortgages, higher insurance premiums are required, as are better credit scores and a reduction in seller concessions. For buyers with good credit (a credit score of 580 or better), the down payment for an FHA loan will stay 3.5 percent. There are cost increases as the mortgage insurance cost have been increased from 1.75 percent to 2.25 percent of the loan; this means that for a $200,000 loan, the cost increase will be at least $1,000.

Affect to the Mortgage Market Since the economic meltdown, many first time home buyers turned to FHA loans because they offered favorable interest rates on loans under a certain dollar amount. As the lending industry fell apart, it offered some home buyers the opportunity to find available lines of credit. It also opened up loans for people who may not have the cash on hand to receive a loan from a major bank such as Bank of America or Wells Fargo.

However, as the lending industry returned to normalcy, the increasing dependency on FHA loans created some problems within the lending world. For example, for many people, the homes they are interested in purchasing are too expensive for an FHA loan. With the threshold ranging from between $400,000 to just over $700,000, quite a few homes fall outside this price range, which which then leaves many potential home buyers scrambling to find a lender.

Jumbo Loans As many banks are already very hesitant to loan money, some types of lending, such as jumbo mortgage loans, fell by the wayside. FHA loans opened the door for lower income people and people with less cash on hand to get loans, but they also interfered with loans for more expensive pieces of property. To get a jumbo mortgage loan, home buyers are looking to alternative lenders such as local banks and finance companies which are trying to sell homes themselves.

J Chase is a mortgage professional. He is affiliated with a national organization that has helped 1000s of homeowners get the best interest rate while financing their property. He has extensive knowledge of the internal & governmental mortgage programs available for homeowners. For information on finding the best jumbo mortgage lender visit http://firstchoicejumboloans.com/

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