FHA High Balance Loan

What is an FHA High Balance Loan?

An FHA High Balance Loan is a type of Federal Housing Administration (FHA) loan designed for borrowers who wish to purchase or refinance properties in high-cost areas where the conventional loan limits are exceeded. These loans are similar to regular FHA loans but have higher limits, allowing borrowers to secure financing for properties in areas with higher real estate prices.

Who Can Benefit from an FHA High Balance Loan?

An FHA High Balance Loan is ideal for:

Homebuyers in High-Cost Areas: Borrowers looking to purchase homes in areas where home prices are above the standard FHA loan limits.
First-Time Homebuyers: Those who may not meet conventional loan requirements but wish to buy a home in a high-value market.
Borrowers with Lower Credit Scores: FHA loans, including High Balance, offer more flexible credit score requirements compared to conventional loans.

Benefits of an FHA High Balance Loan

Higher Loan Limits: The FHA High Balance loan offers higher borrowing limits, enabling you to purchase homes in expensive markets that exceed standard FHA limits.
Low Down Payment: FHA loans typically require a lower down payment, often as low as 3.5%, making homeownership more accessible.
Flexible Credit Requirements: FHA High Balance Loans are available to borrowers with less-than-perfect credit, often starting at a 580 credit score.
Government-Backed Security: Being FHA-insured, these loans carry less risk for lenders, which may lead to more favorable terms for borrowers.

How Does an FHA High Balance Loan Work?

The FHA High Balance Loan is designed for areas where the housing market is particularly expensive. The loan limit for FHA loans varies by county and is based on the median home price in that area. FHA High Balance Loans enable you to borrow more than the standard FHA limit, providing a way to secure financing in markets with higher property values.

Qualifying for an FHA High Balance Loan

Credit Score Requirements: A minimum credit score of 580 is generally required for a 3.5% down payment, though some lenders may accept scores as low as 500 with a larger down payment.
Debt-to-Income (DTI) Ratio: Your DTI ratio, which compares your monthly debt payments to your income, should typically be below 43%, though some exceptions may apply.
Down Payment: A down payment of at least 3.5% is required for borrowers with a credit score of 580 or higher.
Property Eligibility: The property must be a primary residence. FHA High Balance loans are not available for vacation homes or investment properties.
Mortgage Insurance: FHA loans require mortgage insurance premiums (MIP), which can increase the monthly payment but protect the lender in case of default.

Required Documents

Proof of Income: Recent pay stubs, tax returns, and bank statements to demonstrate your ability to repay the loan.
Credit Report: A credit report showing your credit score and history.
Property Appraisal: An appraisal of the property to ensure its value meets FHA requirements.
Employment Verification: Documents that verify your employment and income stability.

Is an FHA High Balance Loan Right for You?

If you are looking to buy a home in a high-cost area but do not qualify for a conventional loan, an FHA High Balance Loan offers a viable option. It provides flexibility in terms of down payments and credit requirements while allowing you to finance a property that exceeds the standard FHA limits.

Contact us today to learn more about how an FHA High Balance Loan can help you secure a home in a high-value market.

We are an independent mortgage brokerage licensed through DRE, proudly serving clients since 2007.

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