How To Qualify For FHA Loan in Clovis California (Fresno County)
Looking for an FHA Loan in Clovis California?
An FHA loan is a home loan that’s 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 important to remember though, that the lower the credit rating, 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 lenders with adequate insurance; and to help stimulate the housing market by making mortgages highly accessible and affordable for people with not so great credit or a low down payment due to FHA mortgage limits in Clovis, 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, lenders can, and do, offer FHA home loans at beneficial 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 Clovis 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.
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 property, 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 Fresno 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 enable 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 minimal even on a worst case rate change.
About Clovis California
The city of Clovis began as a freight stop along the San Joaquin Valley Railroad. Organized on January 15, 1890, by Fresno businessmen Thomas E. Hughes, Fulton Berry, Gilbert R. Osmun, H.D. Colson, John D. Gray, and William M. Williams, in partnership with Michigan railroad speculator Marcus Pollasky, the SJVRR began construction in Fresno on July 4, 1891, and reached the farmlands of Clovis M. Cole and George Owen by October of that year. The railroad purchased right-of-way from both farmers, half from each – the east side from Cole and the west side from Owen – and ran tracks up the borderline between the two properties. The railroad agreed to establish a station on the west side of the tracks and to call it “Clovis.” The Clovis station, which was named after Clovis Cole, was positioned on the Owen side of the track.
Cole and Owen later sold land to Marcus Pollasky for the development of a townsite. Fresno civil engineer Ingvart Tielman mapped the townsite on behalf of Pollasky on December 29, 1891. The original townsite featured streets named for the officers and principal investors of the railroad: (Benjamin) Woodworth, (Marcus) Pollasky, Fulton (Berry), (Thomas) Hughes, (Gerald) Osmun, and (O. D.) Baron. The townsite, named “Clovis” after Clovis Station by Pollasky, was laid out on what was originally Owen’s land.
The railroad was completed as far as the town of Hamptonville (now Friant) on the banks of the San Joaquin River, just 26 miles (42 km) from its point of origin in Fresno. Articles of Incorporation for the San Joaquin Valley Railroad indicate that the corporation intended to build 100 miles (160 km) of track, including sidings and spurs, through the agricultural acreage east of Fresno, then north to the timber and mineral resources of the Sierra foothills. At the time, Hamptonville was called “Pollasky”. A celebration of the completion of track-laying was held at the Pollasky terminus on the Wednesday before Thanksgiving of 1891 with a reported 3,000 Fresnans attending. The railroad began official operation in January 1892.
The first year of operation of the railroad coincided with the beginnings of a deep national economic decline. Farmers were unable to get a profitable return on their crops, banks and railroads failed nationwide. The SJVRR was unable to generate sufficient revenues to pay its debt, was leased to the Southern Pacific Railroad and subsequently bought by SPRR in 1893. By reducing the railroad’s schedule of operation and trimming costs, the Southern Pacific was able to turn a small profit in the first years after its acquisition.
At the same time that the railroad was being planned, a group of Michigan lumbermen began acquiring thousands of acres of timber in the Sierra Nevada about 75 miles (121 km) northeast of Fresno. A dam was built across Stevenson Creek to create a lake that would enable them to move freshly cut timber to a mill beside the lake. They then constructed a 42-mile (68 km), 25-foot-high (7.6 m), V-shaped flume that started at the foot of the dam. As lumber was rough-cut at the mill, it was loaded into the flume and propelled by water to a planing mill east of the Clovis railroad station, where the Clovis Rodeo and Clark Intermediate School sit today. The lumber mill and yard had its own network of rails to move lumber around the yard and to connect with the SJVRR just south of Clovis station.
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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 mortgage or to buy the house. 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 Fresno 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 personal lending institutions. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers buy a house– and renovate it– all with a single home mortgage. House owners can likewise use the program to refinance their current mortgage and add the expense of redesigning jobs into the brand-new loan. FHA 203( k) loans come in two types:
- The limited 203( k) has a simpler application procedure, and the repairs or enhancements should amount to $35,000 or less.
- The standard 203( k) needs extra documents and applies to enhancements costing more than $5,000, but the total worth of the residential or commercial property should still fall within the FHA home mortgage limit for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is likewise guaranteed by the FHA. A HECM enables older property owners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a portion of their home’s equity. The amount that will be available for withdrawal differs by borrower and depends upon the age of the youngest debtor or qualified non-borrowing spouse, current interest rates and the lesser of the house’s appraised worth or the HECM FHA home loan limit or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA permit property buyers to acquire houses that are currently energy effective, such as EnergyStar-certified buildings. 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 down payment.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is geared at customers whose incomes will increase in time. You begin with smaller sized regular monthly payments that gradually increase. 5 specific plans are readily available: 3 plans that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. Two other strategies 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 2022
For 2019, the flooring limit for FHA loans in the majority of the country 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 limitations are described as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict quantities each year in reaction to changing house prices.
FHA is needed by law to change its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations differ according to the expense of living in a certain area, and can be various from one county to the next. Areas with a greater cost of living will have higher limitations, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more pricey.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have suffered a severe financial hardship or are struggling to make their payments.
That relief might be in the form of a momentary period of forbearance, a loan modification that would lower the rate of interest, extend the payback 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 Clovis CA?
The FHA makes it relatively simple to qualify for a loan. Again, the government guarantees the loan, so lenders are more willing to approve mortgage loans. However, lending companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Clovis 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 Clovis to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the 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 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
Customers get their mortgage from FHA-approved loan providers in Clovis rather than the FHA itself, which only guarantees the loans. FHA-approved lenders can have various rates and expenses, even for the very same loan.
FHA loans are readily available through many sources– from the biggest banks and cooperative credit union to community banks and independent mortgage lenders. Expenses, services and underwriting standards vary amongst lending institutions or home loan brokers, so it’s crucial to look around.
Discover more about how to discover low FHA home mortgage lender.