How To Qualify For FHA Loan in Foster City California (San Mateo County)
Looking for an FHA Loan in Foster City California?
An FHA loan is a home loan that’s insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA home loans require lower 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 qualifications.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide lending companies with sufficient insurance; and to help stimulate the housing market by making mortgages highly accessible and affordable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Foster 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 home loan payments.
Because of that insurance, lenders can, and do, offer FHA home loans 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 Foster City 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 home 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 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 aggressive with respect to gifts for down-payment. Very few 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 readjusts 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 modification. This insures that the payment adjustment will be very little even on a worst case rate change.
About Foster City California
Foster City was founded in the 1960s, built on the existing Brewer Island in the marshes of the San Francisco Bay on the east edge of San Mateo, enlarged with engineered landfill. The city was named after T. Jack Foster, a real estate magnate who owned much of the land comprising the city and who was instrumental in its initial design. His firm, Foster Enterprises, now run by his descendants, relocated to San Mateo in 2000 and is still active in real estate affairs throughout the San Francisco Bay Area.
Forbes ranked Foster City #10 on their 2009 list of “America’s Top 25 Towns to Live Well.” Money has also recognized Foster City multiple times as one of the “Best Places to Live.”
According to the United States Census Bureau, the city has a total area of 19.8 square miles (51 km), of which 3.8 square miles (9.8 km2) is land and 16.1 square miles (42 km) is water. The total area is 81.07% water.
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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 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!)
Types of FHA Home Loans
In addition to its popular FHA loan, the FHA also insures other loan programs provided by private loan providers. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans help homebuyers purchase a house– and remodel it– all with a single home mortgage. Homeowners can likewise utilize the program to refinance their existing mortgage and add the cost of renovating projects into the brand-new loan. FHA 203( k) loans come in 2 types:
- The limited 203( k) has a simpler application process, and the repair work or improvements should total $35,000 or less.
- The basic 203( k) needs additional paperwork and applies to improvements costing more than $5,000, but the overall worth of the home must still fall within the FHA home loan limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is likewise insured by the FHA. A HECM enables older house 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 available for withdrawal differs by customer and depends on the age of the youngest customer or qualified non-borrowing partner, existing rate of interest and the lesser of the home’s evaluated value or the HECM FHA home loan limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective mortgages backed by the FHA permit property buyers to acquire homes that are currently energy effective, such as EnergyStar-certified structures. Or they can be utilized to purchase and redesign older houses 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 known as the Graduated Payment Mortgage, this program is tailored at borrowers whose earnings will increase gradually. You start with smaller month-to-month payments that slowly increase. 5 specific plans are offered: three plans that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 other plans set payment increases over 10 years at 2 percent and 3 percent every 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 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 limitations are referred to as “ceilings” and “floorings” that FHA will insure. FHA updates restrict quantities each year in response to changing home prices.
FHA is needed by law to change its quantities based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations differ according to the cost of living in a specific area, and can be different from one county to the next. Locations with a greater cost of living will have greater limits, and vice versa. Special exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home building is more pricey.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have suffered a serious financial challenge 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 decrease the rate of interest, 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 Foster 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 loans. However, mortgage companies can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Foster City 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 Foster 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 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 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 mortgage.
How to Find FHA Lenders
Debtors get their home mortgage from FHA-approved lending institutions in Foster City instead of the FHA itself, which just guarantees the loans. FHA-approved lending institutions can have different 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 neighborhood banks and independent mortgage lending institutions. Costs, services and underwriting standards vary among loan providers or home mortgage brokers, so it’s crucial to search.
Find out more about how to discover low FHA home mortgage lending institution.