How To Qualify For FHA Loan in Glenwood California (Santa Cruz County)
Looking for an FHA Loan in Glenwood California?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA loans require 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 FICO score can be between 500 – 579 if a 10% down payment is made. It’s significant to remember though, that the lower the credit worthiness, 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 increase of foreclosures and defaults that happened in 1930s; to provide lending companies with sufficient insurance; and to help grow the housing market by making mortgages highly accessible and attainable for consumers with not so great credit or a low down payment due to FHA mortgage limits in Glenwood, 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 home loan payments.
Because of that insurance, lenders can, and do, offer FHA home loans 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 Glenwood 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 mortgage.
Borrowers 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 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 Santa Cruz 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 procedure.
The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then adjusts annually after the initial fixed time frame. 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 very little even on a worst case rate change.
About Glenwood California
Glenwood, California, is an unincorporated area of Santa Cruz County. It is located at coordinates Coordinates: , and is 891 feet above sea level.
This historic community, registered as a California Historical Landmark, was founded by Charles C. Martin, who came around Cape Horn in 1847, and his wife, Hannah Carver Martin, who crossed the Isthmus of Panama. Charles Martin first homesteaded the area in 1851 and operated a tollgate and station for stagecoaches crossing the mountains. Later he developed a lumber mill, winery, store, and the Glenwood Resort Hotel. It was known as Martinville from its foundation in 1851 until the establishment of the post office on August 23, 1880.
Glenwood was a stop on the narrow gauge South Pacific Coast Railroad (SPC), which began service from Alameda (north terminus, with a ferry to San Francisco) to Felton in 1880. At Felton, the SPC bought and connected to the former Felton & Santa Cruz Railroad tracks, which ran the remaining six miles southwards through Santa Cruz and out onto a wharf on Monterey Bay. To minimize length and steepness, six tunnels were dug through ridges of the Santa Cruz Mountains. Tunnel Number 2 exited at Glenwood and Tunnel Number 3 exited from just south of Glenwood.
The railroad was acquired in the 1880s by the Southern Pacific, which broad-gauged the line in the early 1900s. The April 18, 1906 San Francisco earthquake twisted some of the rails and damaged bridges and tunnels along the line. The Southern Pacific repaired the railroad, and it continued operations until March 1940. The routing of State Route 17 (SR 17), completed during 1940, barely bypassed Glenwood, contributing to its decline.
Glenwood officially “disappeared” with the closing of the Glenwood U.S. post office in 1954. Mrs. Margaret Koch, a well-known local-history author and great-granddaughter of founder Charles Martin, served as Glenwood’s last postmistress.
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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 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 Santa Cruz 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 Mortgage Loans
In addition to its popular FHA loan, the FHA also insures other loan programs offered by personal loan providers. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans assist property buyers buy a home– and renovate it– all with a single home loan. Homeowners can also use the program to re-finance their current mortgage and include the expense of renovating tasks into the new loan. FHA 203( k) loans been available in two types:
- The limited 203( k) has a simpler application process, and the repair work or improvements need to amount to $35,000 or less.
- The basic 203( k) needs additional documents and applies to improvements costing more than $5,000, but the overall value of the home should still fall within the FHA home mortgage limit for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is also guaranteed by the FHA. A HECM permits older house owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a portion of their house’s equity. The amount that will be available for withdrawal varies by customer and depends on the age of the youngest customer or eligible non-borrowing spouse, existing rate of interest and the lower of the home’s appraised worth or the HECM FHA home mortgage limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient mortgages backed by the FHA enable homebuyers to purchase houses that are already energy efficient, such as EnergyStar-certified buildings. Or they can be utilized to purchase and remodel 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 known as the Graduated Payment Mortgage, this program is geared at borrowers whose earnings will increase gradually. You begin with smaller sized regular monthly payments that slowly go up. Five particular plans are offered: three plans that enable 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 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 2022
For 2019, the floor 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 ago. These limitations are described as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict quantities each year in reaction to altering home prices.
FHA is needed by law to change 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 flooring limitations differ according to the expense of living in a specific location, and can be different from one county to the next. Locations with a greater 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 and construction is more costly.
FHA Loan Relief
Loan servicers can offer some versatility on FHA loan requirements to those who have suffered a major financial hardship or are having a hard time 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 Glenwood CA?
The FHA makes it relatively simple to qualify for a loan. Again, the government guarantees the loan, so lending companies are more willing to approve mortgages. 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 Glenwood CA, you might have better luck with another.
Note: you never know until you submit an app. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Glenwood 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 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 home loan.
How to Find FHA Lenders
Debtors get their home mortgage from FHA-approved lenders in Glenwood instead of the FHA itself, which only guarantees the loans. FHA-approved loan providers can have different rates and expenses, even for the very same loan.
FHA loans are readily available through numerous sources– from the biggest banks and credit unions to community banks and independent mortgage lending institutions. Costs, services and underwriting standards vary amongst lenders or mortgage brokers, so it’s essential to shop around.
Find out more about how to find low FHA home loan loan provider.