How To Qualify For FHA Loan in Concord California (Contra Costa County)
Looking for an FHA Loan in Concord 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 crucial 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 qualifications.
The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide lenders with sufficient insurance; and to help spark the housing market by making home loans more accessible and attainable for people with not so great credit or a low down payment due to FHA mortgage limits in Concord, 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 Concord is one of the easiest types of mortgage loans to get approved 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 circumstances.
Another advantage of an FHA home loan is that it’s an assumable mortgage which means if you want to sell your house, 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 Contra Costa 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 vigorous with respect to gifts for down-payment. Very few mortgage 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 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 time frame. The 3/1 and 5/1 FHA Hybrid products permit 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 Concord California
The valleys north of Mount Diablo were inhabited by the Miwok people, who hunted elk and fished in the numerous streams flowing from the mountain into the San Francisco Bay. It is important to note Miwok and other indigenous people still live within city limits. In 1772, Spanish explorers began to cross the area but did not settle there. In 1834, the Mexican land grant Rancho Monte del Diablo at the base of Mount Diablo was granted to Salvio Pacheco (for whom the nearby town of Pacheco is named).
Concord was founded under the name of Todos Santos (“all saints”; a name still borne by the central city plaza and park between Willow Pass Road and Salvio Street), on the initiative of Pacheco in 1869. It achieved prominence in the 19th century, when most residents of Pacheco relocated to Concord to avoid the devastation of fire and flood which crippled Pacheco’s formerly booming economy. Concord was incorporated on February 5, 1905.
The area around Concord in the surrounding Ygnacio and Clayton Valleys was a large agricultural area. Crops that were grown included grapes, walnuts, almonds, wheat, hay, and even tomatoes. The area to the east (now the site of the Concord Naval Weapons Station) was the site of a few enormous wheat ranches over 5,000 acres (20 km), and was almost a sea of wheat all the way to the marshes bordering Suisun Bay. During Prohibition, many vineyards were removed and replaced with walnut orchards. The town of Cowell, now incorporated into Concord, produced cement.
The first Concord post office opened in 1872.
The munitions on board a Navy cargo ship exploded while being loaded during World War II, resulting in the largest number of casualties among African Americans in any one incident during that war. On the evening of July 17, 1944, a massive explosion instantly killed 320 sailors, merchant seamen, and civilians working at the pier. The blast was felt 30 miles (48 km) away. A subsequent refusal by 258 black sailors to load any more ammunition was the beginning of the Navy’s largest-ever mutiny trial, in which 50 men were found guilty. Future Supreme Court Justice Thurgood Marshall sat in on most of the proceedings and declared that he saw a prejudiced court.
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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 Contra Costa 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 likewise insures other loan programs offered 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. Property owners can also use the program to refinance their current home mortgage and include the cost of redesigning tasks into the new loan. FHA 203( k) loans been available in two types:
- The restricted 203( k) has a much easier application procedure, and the repair work or improvements must total $35,000 or less.
- The basic 203( k) requires extra documents and applies to improvements costing more than $5,000, however the overall worth of the residential or commercial property should still fall within the FHA home mortgage limitation for the location.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise insured by the FHA. A HECM enables older house owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a part of their home’s equity. The quantity that will be available for withdrawal varies by borrower and depends on the age of the youngest customer or eligible non-borrowing spouse, current rates of interest and the lower of the home’s evaluated worth or the HECM FHA mortgage limitation or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA enable property buyers to buy homes 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 bigger down payment.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is tailored at borrowers whose earnings will increase with time. You begin with smaller regular monthly payments that slowly go up. 5 specific strategies are offered: three plans that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. Two other strategies 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 limit for FHA loans in most of the nation is $314,827, up from $294,515 in 2018. For high-cost locations, the ceiling is $726,525, up from $679,650 a year back. These limitations are described as “ceilings” and “floors” that FHA will insure. FHA updates limit quantities each year in response to changing house prices.
FHA is required by law to adjust its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard home loans guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits differ according to the cost of living in a specific area, and can be different from one county to the next. Areas with a higher expense of living will have greater limits, 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 provide some versatility on FHA loan requirements to those who have actually suffered a serious financial difficulty or are struggling 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 interest rate, extend the repayment period, or postpone 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 Concord CA?
The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage lenders are more willing to approve home loans. However, lending companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Concord CA, you might have better luck with another.
Note: you never know until you put in an application. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Concord to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the home loan 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 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 mortgage.
How to Find FHA Lenders
Debtors get their home loans from FHA-approved lending institutions in Concord instead of the FHA itself, which only guarantees the loans. FHA-approved loan providers can have various rates and costs, even for the same loan.
FHA loans are readily available through many sources– from the most significant banks and cooperative credit union to community banks and independent mortgage loan providers. Expenses, services and underwriting requirements vary amongst loan providers or mortgage brokers, so it’s important to look around.
Find out more about how to find low FHA home mortgage loan provider.