How To Qualify For FHA Loan in Escondido California (San Diego County)
Looking for an FHA Loan in Escondido California?
An FHA loan is a mortgage that’s 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 rating 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 rise of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help spark the housing market by making mortgages highly accessible and attainable for people with not so great credit or a low down payment due to FHA mortgage limits in Escondido, California. Essentially, the federal government insures loans for FHA-approved lenders 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 mortgages at really attractive 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 Escondido 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 home 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 mortgage loan is that it’s an assumable 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 Diego 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 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 readjusts annually after the initial fixed time frame. 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 adjustment. This insures that the payment adjustment will be minimal even on a worst case rate change.
About Escondido California
The Escondido area was first settled by the Luiseño, who established campsites and villages along the creek running through the area. They named the place Mixéelum Pompáwvo or “Mehel-om-pom-pavo.” The Luiseno also had another village north of Mixéelum Pompáwvo called Panakare. The Kumeyaay migrated from areas near the Colorado River, settling both in the San Pasqual Valley and near the San Dieguito River in the southwestern and western portions of what is now Escondido. Most of the villages and campsites today have been destroyed by development and agriculture.
Spain controlled the land from the late 18th century to the early 19th century, and established many missions in California to convert the indigenous people. When Mexico gained its independence from Spain, the local land was divided into large ranchos. Most of what is now Escondido occupies the former Rancho Rincon del Diablo (“Devil’s Corner”), a Mexican land grant given to Juan Bautista Alvarado (not the governor of the same name) in 1843 by Governor Manuel Micheltorena. Alvarado was a Regidor of Los Angeles at the time, and the first Regidor of the pueblo of San Diego. The southern part of Escondido occupies the former Rancho San Bernardo, granted in 1842 and 1845.
In 1846, during the Mexican–American War, the Battle of San Pasqual was fought southeast of Escondido. This battle pitted Mexican forces under Andrés Pico (brother of then-California-governor Pío Pico) against Americans under Stephen W. Kearny, Archibald Gillespie, and Kit Carson. A park in Escondido is named for Carson.
The city was home to a largely Spanish-speaking population in the first census, taken in 1850 when California became a state. After statehood, non-Hispanic settlers came to Southern California in increasing numbers. The decade of the 1880s is known as the “Southern California Land Boom” because so many people moved to the state.
In 1853, pro-Southern Copperheads proposed dividing the state of California to create a new Territory of Colorado (at this time the territory that would become the state of Colorado was named “Jefferson”). San Diego Judge Oliver S. Witherby suggested placing the capitol of the new territory in Rancho Rincon del Diablo. He envisioned a railroad connecting San Diego to Fort Yuma through an area about two miles (3 km) south of the current Escondido site, heading east through San Pasqual. With a series of deeds in 1855 and 1856, the rancho was transferred from the heirs of Juan Bautista Alvarado to Witherby. He planned to profit from the town that he believed would be established from the dividing point on the railroad below the eastern hills. The proposal for splitting the state and creating the new territory passed in the California legislature, but died in Congress in the run-up to the Civil War. It was effectively killed in 1861 when Congress organized the Territory of Colorado in the area previously occupied by the Jefferson Territory. With Witherby’s vision of owning a bustling state capitol unrealized, he set up a mining operation on the rancho instead.
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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 San Diego 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 Loans
In addition to its popular FHA loan, the FHA also insures other loan programs provided by personal lenders. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers purchase a house– and refurbish it– all with a single home mortgage. Homeowners can also use the program to re-finance their existing home loan and add the expense of remodeling jobs into the brand-new loan. FHA 203( k) loans can be found in 2 types:
- The limited 203( k) has a much easier application process, and the repairs or improvements need to total $35,000 or less.
- The standard 203( k) requires extra documents and applies to enhancements costing more than $5,000, but the overall worth of the home need to still fall within the FHA mortgage limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise insured by the FHA. A HECM allows older homeowners (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 offered for withdrawal varies by debtor and depends on the age of the youngest borrower or eligible non-borrowing spouse, present interest rates and the lower of the home’s evaluated value or the HECM FHA home loan limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA enable homebuyers to acquire homes that are already energy efficient, such as EnergyStar-certified structures. Or they can be used to buy and redesign 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 known as the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase with time. You start with smaller sized regular monthly payments that gradually increase. 5 particular plans are offered: three plans that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. Two other plans set payment boosts 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 locations, the ceiling is $726,525, up from $679,650 a year back. These limitations are referred to as “ceilings” and “floorings” that FHA will insure. FHA updates limit quantities each year in reaction to changing house prices.
FHA is required 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 flooring limits differ according to the expense of living in a particular area, and can be various from one county to the next. Areas with a higher expense of living will have higher limits, and vice versa. Unique exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home building is more costly.
FHA Loan Relief
Loan servicers can use some flexibility on FHA loan requirements to those who have suffered a serious monetary hardship or are having a hard time to make their payments.
That relief might be in the form of a short-term period of forbearance, a loan modification that would decrease the interest rate, extend the payback period, 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 Escondido CA?
The FHA makes it relatively simple to qualify for a home loan. Again, the government guarantees the loan, so lenders are more willing to approve mortgage loans. However, mortgage companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Escondido CA, you might have better luck with looking around for 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 Escondido 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 requirements 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 demonstrates good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
How to Find FHA Lenders
Customers get their home loans from FHA-approved loan providers in Escondido instead of the FHA itself, which just insures the loans. FHA-approved lenders can have different rates and costs, even for the same loan.
FHA loans are readily available through numerous sources– from the biggest banks and credit unions to neighborhood banks and independent home mortgage lenders. Expenses, services and underwriting standards differ amongst lenders or mortgage brokers, so it’s essential to shop around.
Find out more about how to discover low FHA home loan loan provider.
