How To Qualify For FHA Loan in Burbank California (Santa Clara County)
Looking for an FHA Loan in Burbank California?
FHA loans have been a flexible home loan program that’s been around since the 1930’s and is insured 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 important to remember though, that the lower the credit worthiness, the higher the interest borrowers will pay. 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 rise of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with sufficient insurance; and to help spark the housing market by making home loans more accessible and affordable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Burbank, 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 companies can, and do, offer FHA mortgages at beneficial mortgage 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 Burbank 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 mortgage loan.
Borrowers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get qualified 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 is that it’s an assumable mortgage 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 Santa Clara 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 home loan programs will allow 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 family member, 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 procedure.
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 make it possible for 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 adjustment. This insures that the payment adjustment will be very little even on a worst case rate change.
About Burbank California
The city of Burbank occupies land that was previously part of two Spanish and Mexican-era colonial land grants, the 36,400-acre (147 km) Rancho San Rafael, granted to Jose Maria Verdugo by the Spanish Bourbon government in 1784, and the 4,063-acre (16.44 km2) Rancho Providencia created in 1821. This area was the scene of a military skirmish which resulted in the unseating of the Spanish Governor of California, and his replacement by the Mexican leader Pio Pico.
Dr. David Burbank purchased over 4,600 acres (19 km) of the former Verdugo holding and another 4,600 acres (19 km2) of the Rancho Providencia in 1867 and built a ranch house and began to raise sheep and grow wheat on the ranch. By 1876, the San Fernando Valley became the largest wheat-raising area in Los Angeles County. But the droughts of the 1860s and 1870s underlined the need for steady water supplies.
A professionally trained dentist, Burbank began his career in Waterville, Maine. He joined the great migration westward in the early 1850s and, by 1853 was living in San Francisco. At the time the American Civil War broke out, he was again well established in his profession as a dentist in Pueblo de Los Angeles. In 1867, he purchased Rancho La Providencia from David W. Alexander and Francis Mellus, and he purchased the western portion of the Rancho San Rafael (4,603 acres) from Jonathan R. Scott. Burbank’s property reached nearly 9,200 acres (37 km) at a cost of $9,000. Burbank would not acquire full titles to both properties until after a court decision known as the “Great Partition” was made in 1871 dissolving the Rancho San Rafael. He eventually became known as one of the largest and most successful sheep raisers in southern California, and as a result, he closed his dentistry practice and invested heavily in real estate in Los Angeles.
Burbank also later owned the Burbank Theatre, which opened on November 27, 1893, at a cost of $150,000. It struggled for many years and by August 1900 had its thirteenth manager. The new manager’s name was Oliver Morosco, who was already known as a successful theatrical impresario. He put the theater on the path to prosperity for many years. Though the theater was intended to be an opera house, instead it staged plays and became known nationally. The theatre featured leading actors of the day, such as Fay Bainter and Marjorie Rambeau, until it deteriorated into a burlesque house.
When the area that became Burbank was settled in the 1870s and 1880s, the streets were aligned along what is now Olive Avenue, the road to the Cahuenga Pass and downtown Los Angeles. These were largely the roads the Native Americans traveled and the early settlers took their produce down to Los Angeles to sell and to buy supplies along these routes.
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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 house. Rather, the borrower pays a monthly or annual 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 Santa Clara 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!)
Kinds Of FHA Loans
In addition to its popular FHA loan, the FHA also guarantees other loan programs used by private lending institutions. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers purchase a home– and remodel it– all with a single home mortgage. Homeowners can likewise use the program to refinance their current mortgage and include the cost of redesigning projects into the brand-new loan. FHA 203( k) loans come in two types:
- The minimal 203( k) has an easier application procedure, and the repair work or enhancements must total $35,000 or less.
- The basic 203( k) needs additional documentation and applies to improvements costing more than $5,000, however the overall worth of the home should still fall within the FHA mortgage limitation for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home mortgage and is likewise guaranteed by the FHA. A HECM allows older homeowners (aged 62 and up) with considerable equity or those who own their homes outright to withdraw a part of their house’s equity. The quantity that will be readily available for withdrawal varies by debtor and depends on the age of the youngest customer or eligible non-borrowing spouse, present rate of interest and the lower of the house’s assessed worth or the HECM FHA home mortgage limitation or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow homebuyers to purchase homes that are already energy efficient, such as EnergyStar-certified structures. Or they can be used to purchase and renovate older homes with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger down payment.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is geared at customers whose incomes will increase gradually. You begin with smaller sized regular monthly payments that gradually increase. Five specific strategies are available: 3 plans that enable 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. 2 other plans set payment increases over 10 years at 2 percent and 3 percent each year.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the flooring limitation 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 “floorings” that FHA will insure. FHA updates limit quantities each year in reaction to altering home prices.
FHA is needed by law to change its amounts based on the loan limits set by the Federal Housing Finance Agency, or FHFA, for conventional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limits vary according to the cost of living in a specific area, and can be different from one county to the next. Locations with a higher cost of living will have greater limitations, and vice versa. Unique exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where home building and construction is more expensive.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have actually suffered a serious monetary challenge or are struggling to make their payments.
That relief might be in the form of a momentary duration of forbearance, a loan adjustment that would reduce the interest rate, extend the payback duration, or defer 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 Burbank CA?
The FHA makes it relatively easy to qualify for a mortgage. Again, the government guarantees the loan, so lending companies are more willing to approve home loans. However, mortgage companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Burbank CA, you might have better luck with choosing 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 Burbank 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 fortunate 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 guidelines 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 proves good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Customers get their home mortgage from FHA-approved loan providers in Burbank rather than the FHA itself, which just insures the loans. FHA-approved lenders can have various rates and expenses, even for the exact same loan.
FHA loans are available through numerous sources– from the biggest banks and cooperative credit union to community banks and independent home loan lenders. Costs, services and underwriting requirements differ among lending institutions or home loan brokers, so it’s crucial to shop around.
Learn more about how to discover low FHA mortgage lending institution.
