There is an alternative now that FHA has increased their cap on mortgage loan limits. By the way, FHA does not make loans directly, they insure mortgage lenders from loan default losses.

The Highlights of an FHA Loan Include:

• Cash out FHA loans are available up to 95% loan to value
• Purchase loans are available up to 97% loan to value
• Higher FHA loan limits based on the location of the property
• Flexible underwriting with credit scores as low as 580
• Higher debt ratio may be considered in order to qualify
• Non-occupant co-borrower can be added to qualify
• Certain closing costs have limitations that are set by FHA
• A previous bankruptcy only needs to be discharged 2 years
• Collection accounts may not have to paid to close a loan
• FHA loans do not have a requirement for any cash reserves

With every FHA home loan, there is a mortgage insurance premium of 1.5%, which can be financed into the mortgage on a refinance. There is also a monthly insurance premium of .5% that is added onto the payment. Condominiums do not require the up-front premium, only the monthly amount. 

For loan amounts over $417,000, the maximum cash out is 85% loan to value. Also, if there are any late mortgage payments within the last 12 months, cash out is limited to 85%. 

The debt ratio is 43% of gross income, for all debts, unless there are good compensating factors to offset, such as:  Documented ability to pay more than the proposed loan payment; Demonstrated ability to accumulate savings; If there is only a minimal increase in the housing expense; Have the potential for increased earnings; Have substantial non-taxable income; Have a good credit history.