How To Qualify For FHA Loan in Castro Valley California (Alameda County)

How To Qualify For FHA Loan in Castro Valley California (Alameda County)

Looking for an FHA Loan in Castro Valley California?

FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA mortgages require more flexible minimum credit scores and down payments than many conventional loans.

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 crucial to remember though, that the lower the credit score, 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 qualifications.

The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide lenders with adequate insurance; and to help stimulate the housing market by making mortgages more accessible and attainable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Castro Valley, 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 mortgage payments.

Because of that insurance, mortgage lenders 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.


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Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements

FHA Loan in Castro Valley

Typically an FHA loan in Castro Valley 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 Alameda 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 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 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 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 Castro Valley California

Before the arrival of European settlers the area was settled by the Chocheño (also spelled Chochenyo or Chocenyo) subdivision of the Ohlone Native Americans.

With the arrival of Europeans, they established Mission San Jose in 1797. The area Castro Valley now occupies was part of the extensive colony of New Spain in what was the state of Alta California.

Castro Valley was part of the original 28,000 acre (110 km) land grant given to Castro in 1840, called Rancho San Lorenzo. This land grant included Hayward, San Lorenzo, and Castro Valley, including Crow Canyon, Cull Canyon, and Palomares Canyons. Castro had a gambling habit and had to sell off portions of his land to pay gambling debts. The last of his holding was sold in a sheriff’s sale in 1864 to Faxon Atherton for $400,000.

Atherton (after whom the city of Atherton is named) in turn began selling off his portion in smaller parcels. Two men named Cull (the namesake of Cull Canyon) and Luce bought some 2,400 acres (10 km2) and began running a steam-operated saw mill in Redwood Canyon. The Jensen brothers also bought land from Atherton in 1867.

In 1866, Redwood school was built, the first public school in the area. Many Portuguese families immigrated to the surrounding canyons (especially Palomares Canyon) and farmed large amounts of land, where their descendants remain today. In the 1870s, Lake Chabot, a reservoir and popular park, was built by Chinese laborers living at Camp Yema-Po.
During the 1940s and 1950s, Castro Valley was known for its chicken ranches. Later it developed into a bedroom community, where workers live and commute to their jobs in the surrounding communities.

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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 Alameda 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 Home Loans

In addition to its popular FHA loan, the FHA also insures other loan programs provided by private lenders. Here’s a look at each of them.

  • FHA 203( k) loans – These FHA loans assist homebuyers acquire a house– and renovate it– all with a single mortgage. Property owners can likewise use the program to refinance their current home mortgage and add the cost of redesigning projects into the brand-new loan. FHA 203( k) loans been available in two types:
    • The limited 203( k) has an easier application procedure, and the repairs or improvements need to total $35,000 or less.
    • The basic 203( k) requires additional documents and applies to improvements costing more than $5,000, but the overall value of the home must still fall within the FHA home loan limitation for the location.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is also insured by the FHA. A HECM enables older property owners (aged 62 and up) with substantial equity or those who own their homes outright to withdraw a part of their house’s equity. The quantity that will be offered for withdrawal varies by customer and depends on the age of the youngest customer or qualified non-borrowing partner, current rates of interest and the lesser of the house’s evaluated value or the HECM FHA home mortgage limitation or sales price.
  • FHA Energy Efficient Mortgage (EEM) program – Energy efficient home loans backed by the FHA allow property buyers to purchase homes that are already energy efficient, such as EnergyStar-certified structures. Or they can be used to buy and renovate older houses 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 tailored at borrowers whose incomes will increase gradually. You start with smaller sized monthly payments that slowly go up. 5 specific plans are readily available: 3 strategies that enable five 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 yearly.

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FHA Loan Limits for 2023

For 2019, the flooring limitation for FHA loans in the majority of the country is $314,827, up from $294,515 in 2018. For high-cost locations, the ceiling is $726,525, up from $679,650 a year ago. These limits are described as “ceilings” and “floors” that FHA will insure. FHA updates limit quantities each year in response to changing home rates.

FHA is needed by law to adjust its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional home loans ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations differ according to the cost of living in a particular location, and can be various from one county to the next. Locations with a higher cost of living will have higher limits, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house building is more expensive.

FHA Loan Relief

Loan servicers can provide some flexibility on FHA loan requirements to those who have actually suffered a severe monetary hardship 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 lower the rates of interest, extend the repayment period, 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 Castro Valley CA?

The FHA makes it relatively easy to qualify for a mortgage. Again, the government guarantees the loan, so mortgage lenders are more willing to approve mortgages. However, lenders can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Castro Valley CA, you might have better luck with shopping around for a better option.

Note: you never know until you submit an app. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Castro Valley to find out for sure.

Income limits: there are none. You’ll need enough to show that you can repay the mortgage loan 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 qualifications 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 shows good credit history and a solid track record of timely payments will likely be eligible for the home loan.

How to Find FHA Lenders

Debtors get their home loans from FHA-approved lending institutions in Castro Valley rather than the FHA itself, which just insures the loans. FHA-approved lenders can have various rates and expenses, even for the same loan.

FHA loans are available through numerous sources– from the most significant banks and credit unions to neighborhood banks and independent home loan loan providers. Expenses, services and underwriting requirements differ amongst lenders or mortgage brokers, so it’s important to look around.

Discover more about how to discover low FHA home mortgage loan provider.


(Or call 213-474-7389 to ask a local lender anything!)