How To Qualify For FHA Loan in Daly City California (San Mateo County)
Looking for an FHA Loan in Daly City California?
FHA loans have been a flexible home loan program that’s been around since the 1930’s and is protected 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 rating, 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 lenders with adequate insurance; and to help grow the housing market by making home loans much more accessible and affordable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Daly City, 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 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 Daly City 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.
Borrowers 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 mortgage is that it’s an assumable mortgage loan 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 San Mateo 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 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 process.
The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then readjusts annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products enable 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 Daly City California
Archaeological evidence suggests the San Francisco Bay Area has been inhabited as early as 2700 BC. People of the Ohlone language group probably occupied Northern California from at least the year A.D. 500. Though their territory had been claimed by Spain since the early 16th century, they would have relatively little contact with Europeans until 1769, when, as part of an effort to colonize Alta California, an exploration party led by Don Gaspar de Portolá learned of the existence of San Francisco Bay. Seven years later, in 1776, an expedition led by Juan Bautista de Anza selected the site for the Presidio of San Francisco, which José Joaquín Moraga would soon establish. Later the same year, the Franciscan missionary Francisco Palóu founded the Mission San Francisco de Asís (Mission Dolores). As part of the founding, the priests claimed the land south of the mission for sixteen miles for raising crops and for fodder for cattle and sheep. In 1778, the priests and soldiers marked out a trail to connect San Francisco to the rest of California. At the top of Mission Hill, the priests named the gap between San Bruno Mountain and the hills on the coast La Portezuela (“The Little Door”). La Portezuela was later referred to as Daly’s Hill, the Center of Daly City, and is now called Top of the Hill.
During Spanish rule, the area between San Bruno Mountain and the Pacific remained uninhabited. Upon independence from Spain, prominent Mexican citizens were granted land parcels to establish large ranches, three of which covered areas now in Daly City and Colma. Rancho Buri Buri was granted to Jose Sanchez in 1835 and covered 14,639 acres (59.24 km) including parts of modern-day Colma, Burlingame, San Bruno, South San Francisco, and Millbrae. Rancho Laguna de la Merced was 2,219 acres (8.98 km2) acres and covered the area around a lake of the same name. The third ranch covering parts of the Daly City–Colma area was named Rancho Cañada de Guadalupe la Visitación y Rodeo Viejo and stretched from the Visitacion Valley area in San Francisco, to the city of South San Francisco covering 5,473 acres (22.15 km).
Following the Mexican Cession of California at the end of the Mexican–American War the owners of Rancho Laguna de La Merced tried to claim land between San Bruno Mountain and Lake Merced. An 1853 US government survey declared that the contested area was in fact government property and could be acquired by private citizens. There was a brief land rush as settlers, mainly Irish established ranches and farms in parts of what is now the neighborhoods of Westlake, Serramonte, and the cities of Colma and Pacifica. A decade later, several families left as increase in the fog density killed grain and potato crops. The few remaining families switched to dairy and cattle farming as a more profitable enterprise. In the late 19th century as San Francisco grew and San Mateo County was established, Daly City also gradually grew including homes and schools along the lines for the Southern Pacific railroad. Daly City served as a location where San Franciscans would cross over county lines to gamble and fight. As tensions built in approach to the American Civil War, California was divided between pro-slavery, and Free Soil advocates. Two of the main figures in the debate were US Senator David C. Broderick, a Free Soil advocate, and David S. Terry, who was in favor of extension of slavery into California. Quarreling and political fighting between the two eventually led to a duel in the Lake Merced area at which Terry mortally wounded Broderick, who would die three days later. The site of the duel is marked with two granite shafts where the men stood, and is designated as California Historical Landmark number 19.
On the morning of April 18, 1906, a major earthquake struck just off the coast of Daly City near Mussel Rock. After quake and subsequent fire destroyed many San Franciscans homes, they left to temporary housing on the ranches of the area to the south, including the large one owned by John Daly. Daly had come to the Bay Area in 1853 where he had worked on a dairy farm, and after several years married his bosses’ daughter and acquired 250 acres (1.0 km) at the Top of the Hill area. Over the years Daly’s business grew, as did his political clout. When a flood of refugees from the quake came, Daly and other local farmers donated milk and other food items. Daly later subdivided his property, from which several housing tracts emerged.
As some of the refugees established homes in the area, the need for city services grew. This, combined with the fear of annexation by San Francisco and being ignored by San Mateo County, whose seat far to the south left residents feeling ignored, created a demand for incorporation. The first such attempt was proposed in 1908 for incorporation as the city of Vista Grande. Vista Grande would have spanned from the Pacific to the Bay, with San Francisco as its northern border and South San Francisco and the old Rancho Buri Buri as its southern border. The proposal was rejected over the scope of the planned city, which was too broad for many residents. The initial proposal also revealed rifts in the community among the various regions, including the area around the cemeteries, who were excluded from further plans of incorporation. On January 16, 1911, an incorporation committee filed a petition with San Mateo County supervisors to incorporate the City of Daly City. The city would run from San Francisco along the San Bruno Hills until Price and School streets with San Francisco and west to the summit of the San Bruno Hills. The city would have an estimated population of 2,900. On March 18, 1911, a special election was held, with incorporation narrowly succeeding by a vote of 132 to 130.
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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 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 San Mateo 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 Mortgage Loans
In addition to its popular FHA loan, the FHA also insures other loan programs offered by private loan providers. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help homebuyers buy a house– and remodel it– all with a single home loan. Property owners can likewise utilize the program to re-finance their existing home mortgage and include the expense of redesigning tasks into the new loan. FHA 203( k) loans been available in 2 types:
- The restricted 203( k) has a much easier application procedure, and the repair work or improvements should total $35,000 or less.
- The standard 203( k) requires extra documents and applies to improvements costing more than $5,000, however the overall value of the property should still fall within the FHA mortgage limitation for the area.
- House 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 house owners (aged 62 and up) with substantial equity or those who own their houses outright to withdraw a part of their home’s equity. The amount that will be available for withdrawal varies by debtor and depends on the age of the youngest borrower or qualified non-borrowing spouse, existing rates of interest and the lesser of the house’s assessed worth or the HECM FHA mortgage limitation or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow property buyers to purchase houses that are currently energy efficient, such as EnergyStar-certified buildings. Or they can be used to buy and remodel older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a bigger deposit.
- FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is tailored at customers whose incomes will increase in time. You begin with smaller sized month-to-month payments that gradually go up. Five particular plans are offered: 3 strategies that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent yearly. Two 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 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 earlier. These limitations are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates restrict quantities each year in action to altering home prices.
FHA is required by law to change its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional home mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits vary according to the cost of living in a specific area, and can be various from one county to the next. Areas with a greater cost of living will have greater limitations, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house building and construction is more costly.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have actually suffered a major financial difficulty or are struggling to make their payments.
That relief might be in the form of a short-lived period of forbearance, a loan modification that would decrease the rate of interest, extend the repayment 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 Daly City CA?
The FHA makes it relatively simple to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage lenders 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 Daly City 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 Daly City 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 borrowers. 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 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
Debtors get their home mortgage from FHA-approved lending institutions in Daly City instead of the FHA itself, which only guarantees the loans. FHA-approved lending institutions can have different rates and costs, even for the same loan.
FHA loans are available through many sources– from the greatest banks and cooperative credit union to neighborhood banks and independent home loan lending institutions. Expenses, services and underwriting requirements vary among lending institutions or home loan brokers, so it’s important to look around.
Learn more about how to find low FHA home loan lender.
