FHA Jumbo Loans Up To $1,000,000??
Posted Nov 10, 2007 @ 1:22 pm, Viewed by 446 Visitors, Read 468 Times.I was suprised to hear that the Federal Reserve and other government entities are floating the idea of allowing the FHA to insure Jumbo loans at up to $1,000,000. This could potentially mean that in the near future, someone with average credit and no(or low) down payment would actually be able to get a loan of up to $1,000,000 at a favorable rate.
It doesn't take a rocket scientist to see how that could help stimulate the market by allowing a huge pool of people to be eligible for loans who otherwise wouldn't qualify. There has already been talk of raising the FHA guidelines for high cost areas, but this is the first time there has been mention of FHA loans possibly going up to 1 mil. I think all these types of ideas need to be explored considering the recent developments in the mortgage industry.
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Morgan, I do agree that it is important that borrowers are qualified to get these loans. I think the larger danger is when people are allowed to get interest-only and short term adjustable loans which build negative equity or have the potential to radically adjust due to interest rates. If 30 yr fixed loans are used, then there is less danger IMO. The payments on these loans never change, and if the borrower ends up not being able to pay then there is a certain amount of responsibility that lies with them, not the lenders. At the same time, I WAS surprised that they are contemplating raising the limit to 1 mil, this may be overkill.
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Hamid Grinage is a Realtor with the Grand Lake office of Prudential California Realty in Oakland. He is E-Certified, a graduate of Sonoma State University, and a member of the National, California and Oakland Association of Realtors.
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At the same time though Hamid, doesn't that seem a bit irresponsible? I mean sure it is a short term solution to stimulate the marketplace in terms of transactions, but what other measures are in place to ensure that these purchasers are qualified to carry such a large debt load? I mean isn't there a danger of them all foreclosing sooner or later due to spending outside of their means? As you know buddy, I am not a mortgage broker, but I read this, and that is what first came to mind - perhaps you could enlighten me?