How To Qualify For FHA Loan in Bakersfield California (Kern County)
Looking for an FHA Loan in Bakersfield California?
FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is protected by the Federal Housing Administration (FHA). They are popular especially among first time home buyers because they allow down payments of 3.5% for credit scores of 580+.
How Does an FHA Loan Work?
Borrowers can qualify for an FHA loan with a down payment as little as 3.5% for a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 if a 10% down payment is made. It’s significant to remember though, that the lower the credit score, the higher the interest borrowers will receive. Something also worth noting is that the FHA loan limits affect your FHA mortgage insurance – its just part of the FHA loan requirements.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide mortgage companies with adequate insurance; and to help stimulate the housing market by making mortgages more accessible and affordable for people with not so great credit or a low down payment due to FHA mortgage limits in Bakersfield, California. Essentially, the federal government insures loans for FHA-approved mortgage companies in order to reduce their risk of loss if a borrower defaults on their home loan payments.
Because of that insurance, mortgage lenders can, and do, offer FHA home loans at beneficial mortgage loan interest rates and with less stringent and more flexible qualification requirements. The FHA is an agency within the U.S. Department of Housing and Urban Development.
(Or call 213-474-7389 to ask a local lender anything!)
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan in Bakersfield is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 500 can qualify for an FHA home loan.
Consumers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get approved for private mortgage insurance should look into whether an FHA loan is the popular option for their personal scenario.
Another advantage of an FHA mortgage loan is that it’s an assumable loan which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
FHA Allows a 3.5% Down-Payment
For today’s home buyers, there are only a few mortgage options which allow for down-payments of five percent or less for residents of Kern County. The FHA is one of them.
With an FHA mortgage, you can make a down-payment as small as 3.5%. This benefits home buyers who don’t have a lot of money saved up for down-payment; and, home buyers who would rather save money for moving costs, emergency funds, or other needs.
FHA Allows 100% Gift Funds
The FHA is aggressive with respect to gifts for down-payment. Very few mortgage loan programs will permit your entire down-payment for a home to come from a gift. The FHA will.
Via the FHA, your entire 3.5% down-payment can be a gift from parents or another relative, an employer, an approved charitable group, or a government home-buyer program. If you’re using a down-payment gift, though, you’ll need to follow the process.
The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then changes annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products allow up to a 1% annual interest rate adjustment after the initial fixed interest rate period, and a 5% interest rate cap over the life of the loan. The new payment after an adjustment will be calculated on the current principal balance at the time of the modification. This insures that the payment adjustment will be very little even on a worst case rate change.
About Bakersfield California
Historical evidence indicates the visibility of Native American settlements dating back countless years. Upon Spanish arrival, present-day Bakersfield was populated by the Yowlumne, a Yokuts individuals. Yowlumne accounts indicate that the town of Woilu was located in the bounds of the existing city.
The Yokuts of the region resided in lodges along the branches of the Kern River delta and also pursued antelope, tule elk, deer, bear, game, as well as fish birds.
In 1776, Spanish missionary Francisco Garcés came to be the initial European to discover the location. Recording his May 1 arrival to a Yokuts village along the Kern River, right away northeast of present-Bakersfield, Garcés wrote,
Offered the remoteness as well as inaccessibility of the region, the Yokuts remained mainly separated from more call until after the Mexican War of Independence, when Mexican inhabitants started to move to the location. Following the discovery of gold in California in 1848, settlers swamped into the San Joaquin Valley. In 1851, gold was found along the Kern River in the southern Sierra Nevada, as well as in 1865, oil was discovered in the valley. The Bakersfield area, as soon as a tule reed-covered marshland, was first recognized as Kern Island to the handful of pioneers, that developed log cabins there in 1860. The location was subject to routine flooding from the Kern River, which inhabited what is currently the downtown area, as well as experienced break outs of jungle fever.
Bakersfield is the fifth-largest majority-Hispanic city in the United States, with 53% of its populace being Hispanic in 2020.
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Who Are FHA Loans For?
FHA loans are offered to low-income individuals who have credit scores as low as 500. Individuals with a credit score between 500-579 can obtain an FHA loan with a down payment of 10%; individuals with a credit score higher than 580 can get an FHA loan with as little as 3.5% down. The Federal Housing Administration does not lend the borrower the money to take on a home loan or to buy the property. Rather, the borrower pays a monthly or yearly mortgage insurance premium to the FHA to insure the loan which the lending institution issues to him or her. In case of default, the lender’s financial risk is minimized since the FHA would step in to cover the payments.
Having no credit history is not a problem with an FHA loan for Kern County. Instead of your credit report, the lender may look at other payment-history records, such as utility and rent payments.
Even people who have gone through bankruptcy and foreclosure may still qualify for an FHA loan. However, the lower the credit score and the lower the down payment, the higher the interest rate.
(Or call 213-474-7389 to ask a local lender anything!)
Types of FHA Loans
In addition to its popular FHA loan, the FHA also guarantees other loan programs used by personal loan providers. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers acquire a home– and refurbish it– all with a single mortgage. Homeowners can likewise use the program to refinance their existing mortgage and include the expense of redesigning jobs into the brand-new loan. FHA 203( k) loans been available in 2 types:
- The minimal 203( k) has an easier application procedure, and the repairs or improvements need to total $35,000 or less.
- The standard 203( k) requires additional paperwork and applies to improvements costing more than $5,000, however the total worth of the residential or commercial property should still fall within the FHA mortgage limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise guaranteed by the FHA. A HECM permits older homeowners (aged 62 and up) with substantial equity or those who own their houses outright to withdraw a portion of their house’s equity. The amount that will be readily available for withdrawal differs by debtor and depends upon the age of the youngest debtor or qualified non-borrowing spouse, current rate of interest and the lesser of the house’s evaluated value or the HECM FHA home mortgage limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA allow homebuyers to buy houses that are currently energy efficient, such as EnergyStar-certified structures. Or they can be utilized to purchase and renovate older houses with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger deposit.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase with time. You start out with smaller sized regular monthly payments that gradually increase. Five specific plans are offered: 3 strategies that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent yearly. 2 other plans set payment boosts over 10 years at 2 percent and 3 percent annually.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the flooring limit for FHA loans in most of the nation is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year back. These limits are referred to as “ceilings” and “floors” that FHA will guarantee. FHA updates limit amounts each year in response to altering home costs.
FHA is needed by law to change its quantities based on the loan limits set by the Federal Housing Finance Agency, or FHFA, for conventional home loans guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limits differ according to the expense of living in a particular area, and can be various from one county to the next. Locations with a higher cost of living will have greater limitations, and vice versa. Unique exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home building is more pricey.
FHA Loan Relief
Loan servicers can offer some versatility on FHA loan requirements to those who have suffered a serious monetary hardship or are having a hard time to make their payments.
That relief might be in the form of a short-term period of forbearance, a loan adjustment that would decrease the rates of interest, extend the repayment duration, or delay part of the loan balance at no interest.
The FHA Hybrid Adjustable Rate
FHA administers a number of programs, based on Section 203(b), that have special features. One of these programs, Section 251, insures adjustable rate mortgages (ARMs) which, particularly during periods when interest rates are low, enable borrowers to obtain mortgage financing that is more affordable by virtue of its lower initial interest rate. This interest rate is adjusted annually, based on market indices approved by FHA, and thus may increase or decrease over the term of the loan. In 2006 FHA received approval to allow hybrid ARMs, in which the interest is fixed for the first 3 or 5 years, and is then adjusted annually according to market conditions and indices.
How do you Qualify for an FHA Loan in Bakersfield CA?
The FHA makes it relatively simple to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve loans. However, mortgage companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Bakersfield CA, you might have better luck with looking around for another.
Note: you never know until you apply. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Bakersfield to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage but these loans are geared towards lower income applicants. If you’re lucky enough to have a high income, you aren’t disqualified like you might be with certain first-time home buyer programs.
FHA Closing Costs
While FHA defines which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office.
FHA Debt Ratios
In order to prevent home-buyers from getting into a home they cannot afford, FHA requirements have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios.
FHA Credit Issues
An FHA loan applicant’s past credit performance that attests good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Borrowers get their mortgage from FHA-approved lending institutions in Bakersfield rather than the FHA itself, which just insures the loans. FHA-approved lending institutions can have various rates and costs, even for the very same loan.
FHA loans are available through many sources– from the biggest banks and cooperative credit union to community banks and independent home loan loan providers. Costs, services and underwriting standards differ among lenders or mortgage brokers, so it’s important to look around.
Learn more about how to discover low FHA mortgage loan provider.
