What constitutes an FHA jumbo loan?

[Anonymous]

I've been approved through automated underwriting by a lender for $600,000.  I was quoted 6.75% for a 30 year FHA fixed.  I inquired about the rate being so high, as I've seen recent rate drops, and I was told that my loan is an FHA jumbo.  What constitutes a jumbo?  I'm shopping in Orange County, California, which is a "high cost" area.  I thought the 2008 conforming limit was $729,750 (and 2009 is $625,500 as of 11/8/08).  If that's the case, why would my loan be a jumbo?

Message Edited by bigred2002 on 12-01-2008 01:58 PM

[ShanetheMortgageMan]

Anything over $362,790 qualifies for FHA Jumbo interest rates.  $362,790 use to be the old "ceiling" for FHA loans throughout the US, up until this past March, when the new high cost loan limits went into effect.  That was just through 2008 though (as you notice from the 1/1/09 date that lower loan amounts are taking over), and from 1/1/09 forward (some lenders have already started offering the program) the $362,790 threshold between normal FHA & FHA Jumbo interest rates might change.  Here in Orange County it's really affecting those homes in the $625k+ range as there will be less demand due to FHA not being a great option.  The alternative is a normal non-conforming jumbo loan which will require at least 15% down anyway (due to a declining market we are hit with a 5% reduction in max LTV financing that mortgage insurance providers will insure).  6.75% is still really high for an FHA Jumbo today though - should be more like 5.875% or 6%.

[Anonymous]

Thanks, Shane.  I appreciate your help.  I've been told the reason for the rate is a combination of FICO and purchase price.  This purchase will be made with my fiancé.  I'm recovering from identity theft, so my mid score is 631.  Her mid score is 790.  We have a combined income of $170k annually.  The largest portion of that is my income, so I'm told that my mid score is used.  I've advised the lender that I may shop around, and how she's trying to dissuade me based on inquiries lowering our FICO scores. 

[ShanetheMortgageMan]

Welcome.  The purchase price has nothing to do with FHA interest rates, only the loan amount, so that is inaccurate information on their part.  The lowest qualifying score out of all applicants determines interest rates, but 620 and above scores all qualify for the same FHA rates.  Some lenders, like Wells Fargo, will give a slight negative adjustment (as in .125% in rate at most) for FICO scores of 620-659 on their FHA Jumbo program but that is rare.  "Like" inquiries within a 14 or 30 day period (depending on the reporting system the credit vendor uses) will only count as 1 when it comes to your FICO scores.  It sounds like this lender isn't too confident, I'd ask how long the loan officer has been doing mortgage loans for.  P.S. I responded to your message.

[Anonymous]

I just checked my inbox, but nothing yet.  Can you resend?  Thank you!