How To Qualify For FHA Loan in Fountain Valley California (Orange County)
Looking for an FHA Loan in Fountain Valley California?
FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA loans require more flexible minimum credit scores and down payments than many commonplace 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 rating can be between 500 – 579 if a 10% down payment is made. It’s important 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 requirements.
The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with sufficient insurance; and to help spark the housing market by making mortgages much more accessible and attainable for consumers with less than stellar credit or a low down payment due to FHA mortgage limits in Fountain Valley, California. Essentially, the federal government insures loans for FHA-approved mortgage lenders 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 mortgages at really attractive 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 Fountain Valley 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.
Consumers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get qualified for private mortgage insurance should look into whether an FHA loan is the popular option for their personal scenario.
Another advantage of an FHA home 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 Orange 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 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 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 Fountain Valley California
The area encompassing Fountain Valley was originally inhabited by the Tongva people. European settlement of the area began when Manuel Nieto was granted the land for Rancho Los Nietos, later Rancho Las Bolsas, which encompassed over 300,000 acres (1,200 km), including present-day Fountain Valley. Control of the land was subsequently transferred to Mexico upon independence from Spain, and then to the United States as part of the Treaty of Guadalupe Hidalgo.
Talbert was a settlement at what is now the intersection of Talbert and Bushard. It was also known as Gospel Swamp by residents.
Thomas B. Talbert was born outside Montecello in Piatt County, Illinois, in 1878. When Talbert was 13, his family moved to Long Beach, California. Around 1896, the family purchased more than 300 acres (120 ha) of peat and swampland in what is now Fountain Valley. The Talberts opened a general store and thus the settlement of Talbert was established.
The area was full of farms growing beets that were processed at some of the nation’s largest plants at Huntington Beach (Holly Sugar Plant) and at Delhi, now part of southwestern Santa Ana. The post office was established in 1899, with Thomas B. Talbert serving as the first postmaster.
The All-Saints Church is the only structure remaining from that era. The Santa Ana-Huntington Beach line of the Pacific Electric Railway passed through Talbert and opened on July 5, 1909.
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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 Orange 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 likewise guarantees other loan programs used by personal loan providers. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help property buyers buy a home– and refurbish it– all with a single home loan. Homeowners can likewise utilize the program to re-finance their existing home loan and add the expense of redesigning jobs into the new loan. FHA 203( k) loans come in 2 types:
- The restricted 203( k) has a much easier application procedure, and the repair work or improvements need to total $35,000 or less.
- The basic 203( k) needs additional documents and applies to enhancements costing more than $5,000, however the total worth of the property should still fall within the FHA home loan limit for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is also guaranteed by the FHA. A HECM enables older house owners (aged 62 and up) with significant equity or those who own their houses outright to withdraw a portion of their house’s equity. The amount that will be offered for withdrawal differs by customer and depends on the age of the youngest borrower or eligible non-borrowing spouse, current interest rates and the lower of the house’s assessed value or the HECM FHA home mortgage limitation or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home loans backed by the FHA allow property buyers to acquire homes that are currently energy effective, such as EnergyStar-certified structures. Or they can be utilized to purchase and renovate older homes 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 earnings will increase gradually. You start out with smaller monthly payments that gradually go up. 5 particular plans are readily available: 3 strategies that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other strategies 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 2022
For 2019, the floor limitation for FHA loans in the majority 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 limits are referred to as “ceilings” and “floorings” that FHA will insure. FHA updates limit quantities each year in action to changing home prices.
FHA is needed by law to adjust its quantities 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 flooring limitations differ according to the cost of living in a specific location, and can be various from one county to the next. Locations with a greater expense of living will have higher limits, and vice versa. Special exceptions are produced housing in Alaska, Hawaii, Guam and the Virgin Islands, where home building and construction is more expensive.
FHA Loan Relief
Loan servicers can use some flexibility 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 duration of forbearance, a loan adjustment that would decrease the rates 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 Fountain Valley 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, mortgage lenders can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Fountain Valley CA, you might have better luck with 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 Fountain Valley to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage but these loans are geared towards lower income borrowers. 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 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
Customers get their mortgage from FHA-approved loan providers in Fountain Valley rather than the FHA itself, which just guarantees the loans. FHA-approved lenders can have different rates and expenses, even for the very same loan.
FHA loans are offered through lots of sources– from the most significant banks and credit unions to neighborhood banks and independent home mortgage lending institutions. Expenses, services and underwriting requirements vary amongst loan providers or home mortgage brokers, so it’s important to look around.
Learn more about how to discover low FHA mortgage lender.