How To Qualify For FHA Loan in Guadalupe California (Santa Barbara County)

How To Qualify For FHA Loan in Guadalupe California (Santa Barbara County)

Looking for an FHA Loan in Guadalupe 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 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 significant 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 companies with sufficient insurance; and to help stimulate the housing market by making home loans highly accessible and affordable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Guadalupe, 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, mortgage lenders can, and do, offer FHA mortgages at beneficial 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.


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Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements

FHA Loan in Guadalupe

Typically an FHA loan in Guadalupe 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 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 is that it’s an assumable mortgage loan which means if you want to sell your home, 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 Barbara 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 home 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 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 changes 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 modification. This insures that the payment adjustment will be minimal even on a worst case rate change.

About Guadalupe California

The first European land exploration of Alta California, the Spanish Portolá expedition, camped near today’s Guadalupe on September 1, 1769. Franciscan missionary and expedition member Juan Crespí noted in his diary that they found “a very large lake”. The lake has since mostly filled in, leaving a low-lying plain traversed by the Santa Maria River and several tributaries.

When Mission La Purisima was established in 1787, the area became part of the mission’s pasture land. In 1840, following secularization of the mission, the area became part of the Rancho Guadalupe land grant. Rancho Guadalupe was settled by pioneers of many unique backgrounds, such as European, Chinese, Filipino, Japanese, and Mexican. The small town was incorporated as the city of Guadalupe on May 19, 1946. The city name honors Our Lady of Guadalupe, which is the Catholic title given to the Virgin Mary.

Guadalupe is located in the northwestern extremity of Santa Barbara County, immediately south of the Santa Maria River. The landscape in the vicinity of the town is mostly flat, with the predominant land use being agriculture and oil production. Hills rise to the south of the town; on the other side of the hills is Vandenberg Space Force Base. West of town, both in Santa Barbara County and north in adjacent San Luis Obispo County, is the Guadalupe-Nipomo Dunes, a large region of dune habitat along the Pacific Ocean shore. Filmmakers have used this region as a setting for several films, including Cecil B. DeMille’s 1923 Ten Commandments and in 1998 The Odd Couple II. Scenes from Pirates of the Caribbean: At World’s End and Hidalgo have also been filmed here. The Guadalupe-Nipomo Dunes Center serves as the education and research facility for the natural area.

According to the United States Census Bureau, the city has a total area of 1.3 square miles (3.4 km), 99.60% of it land and 0.40% of it water. The town consists of a tight cluster of buildings, surrounded completely by agricultural land.

This region experiences mildly warm and dry summers, with no average monthly temperatures above 71.6 °F. According to the Köppen Climate Classification system, Guadalupe has a warm-summer Mediterranean climate, abbreviated “Csb” on climate maps.

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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 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 Barbara 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.


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Types of FHA Home Loans

In addition to its popular FHA loan, the FHA also guarantees other loan programs provided by personal lending institutions. Here’s a look at each of them.

  • FHA 203( k) loans – These FHA loans help property buyers purchase a house– and refurbish it– all with a single home loan. Property owners can also utilize the program to re-finance their current mortgage and add the expense of renovating jobs into the brand-new loan. FHA 203( k) loans been available in 2 types:
    • The minimal 203( k) has an easier application process, and the repairs or improvements should amount to $35,000 or less.
    • The basic 203( k) needs additional documentation and applies to enhancements costing more than $5,000, however the total worth of the home need to still fall within the FHA mortgage limitation for the area.
  • House Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is likewise guaranteed by the FHA. A HECM allows older house owners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a portion of their house’s equity. The amount that will be readily available for withdrawal differs by debtor and depends upon the age of the youngest borrower or qualified non-borrowing spouse, current 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 home loans backed by the FHA permit homebuyers to purchase houses that are already energy efficient, such as EnergyStar-certified buildings. Or they can be used to buy and redesign older homes with energy-efficient, or “green,” updates and roll the expenses 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 debtors whose earnings will increase with time. You start out with smaller sized month-to-month payments that slowly go up. Five particular strategies are available: 3 plans that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. Two other plans set payment increases over 10 years at 2 percent and 3 percent each year.

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FHA Loan Limits for 2022

For 2019, the flooring limit for FHA loans in the majority 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 earlier. These limitations are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit quantities each year in action to changing house rates.

FHA is required by law to adjust its amounts based on the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits vary according to the expense of living in a particular location, and can be various from one county to the next. Areas with a higher expense of living will have greater limits, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where home building and construction is more costly.

FHA Loan Relief

Loan servicers can provide some flexibility 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 temporary period of forbearance, a loan modification that would lower the interest rate, extend the repayment 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 Guadalupe 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 mortgage loans. However, mortgage lenders can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Guadalupe 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 Guadalupe 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 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

Customers get their home mortgage from FHA-approved lenders in Guadalupe instead of the FHA itself, which just insures the loans. FHA-approved lenders can have different rates and expenses, even for the same loan.

FHA loans are readily available through many sources– from the greatest banks and cooperative credit union to neighborhood banks and independent home mortgage lending institutions. Costs, services and underwriting requirements differ amongst loan providers or mortgage brokers, so it’s important to shop around.

Discover more about how to discover low FHA home loan lender.


(Or call 213-474-7389 to ask a local lender anything!)