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

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

Looking for an FHA Loan in Lompoc 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 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 crucial 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 qualifications.

The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide mortgage companies with adequate insurance; and to help spark the housing market by making home loans more accessible and attainable for people with not so great credit or a low down payment due to FHA mortgage limits in Lompoc, 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 mortgage payments.

Because of that insurance, mortgage lenders can, and do, offer FHA mortgages at beneficial 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 Lompoc

Typically an FHA loan in Lompoc 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 loan.

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 circumstances.

Another advantage of an FHA mortgage loan is that it’s an assumable mortgage 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 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 aggressive 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 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 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 very little even on a worst case rate change.

About Lompoc California

Before the Spanish conquest, the area around Lompoc was inhabited by the Chumash people. The Original Mission La Purísima was established in 1787 near what is now the southern edge of the city. Purisimeño, a Chumashan language, was spoken in the region during the mission period. After an earthquake destroyed the mission in 1812, it was moved to its present location 1 mile (1.6 km) northeast of the present city. After independence from the Spanish Empire, the First Mexican Empire was established in 1821. The Mexicans secularized the Spanish missions in 1833, and La Purisima Mission fell into ruins.

In 1893, a diatomaceous earth mine, formerly owned by Johns Manville, World Mineral, and Celite corporation, now Imerys Inc., opened in the southern hills in Miguelito Canyon. It became (and still is) the largest marine diatomite mine in the world, and at one time was the largest employer in the valley. While owned by Johns Manville, the mine employed more than 900 people at its peak, and built housing for its employees onsite and in town; the houses in town are next to JM park, which was donated to the city by the mine. Another diatomaceous earth company, Grefco, operated here from the 1940s until 1998. The remnants of its mine at the northeast end of town were torn down in 2001.

In 1909, the Sibyl Marston—at the time, the largest steam schooner built on the West Coast—sank nearby while carrying 1,100,000 board feet (2,600 m) of lumber. Many of the older Lompoc homes were built with lumber from the shipwreck. The wreckage can still be seen south of Surf Beach.

The coastal branch of the Southern Pacific Railroad opened around 1900 and eventually replaced ship transportation. A paved road linked Lompoc to Buellton and the rest of California around 1920. In 1923, the Honda Point disaster, the U.S.’s largest peacetime naval accident, occurred just off the coast; nine U.S. destroyers ran aground, killing 23 people. During the Great Depression, La Purisima Mission was restored by the Civilian Conservation Corps (CCC). During World War II, the coast west of Lompoc was the site of Camp Cooke, a United States Army training camp where large units could practice maneuvers.

Lompoc grew slowly until 1958, when the United States Air Force announced that the former Camp Cooke would be a test site for the Thor family of intermediate-range ballistic missiles and the first operational base for the SM-65 Atlas, an intercontinental ballistic missile. The city then began to grow rapidly to provide housing for thousands of civilians and contractors employed at what was soon renamed Vandenberg Air Force Base. It was the Air Force’s first missile base.

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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 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.


(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 also insures other loan programs offered by private lending institutions. Here’s a take a look at each of them.

  • FHA 203( k) loans – These FHA loans assist property buyers purchase a home– and remodel it– all with a single home mortgage. House owners can likewise utilize the program to refinance their current home loan and include the expense of remodeling projects into the brand-new loan. FHA 203( k) loans can be found in two types:
    • The restricted 203( k) has a much easier application process, and the repair work or improvements need to amount to $35,000 or less.
    • The standard 203( k) requires additional documents and applies to improvements costing more than $5,000, but the overall worth of the home need to still fall within the FHA home mortgage limit for the location.
  • House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is also guaranteed 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 part 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 rates of interest and the lower of the house’s appraised worth or the HECM FHA home mortgage limit or sales price.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA permit homebuyers to purchase homes that are already energy efficient, such as EnergyStar-certified buildings. Or they can be utilized to buy and redesign older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a larger down payment.
  • FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is tailored at customers whose earnings will increase in time. You start out with smaller monthly payments that gradually increase. Five specific strategies are available: three strategies that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent yearly. Two other plans set payment increases over 10 years at 2 percent and 3 percent every year.

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FHA Loan Limits for 2022

For 2019, the floor limitation 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 back. These limits are referred to as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit amounts each year in reaction to altering house costs.

FHA is needed by law to adjust its quantities based on 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 particular location, and can be different from one county to the next. Areas with a greater cost of living will have higher limitations, and vice versa. Special exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home building and construction is more costly.

FHA Loan Relief

Loan servicers can use some flexibility on FHA loan requirements to those who have suffered a major financial challenge or are having a hard time to make their payments.

That relief might be in the form of a short-lived period of forbearance, a loan modification that would reduce the rates of interest, extend the payback duration, 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 Lompoc CA?

The FHA makes it relatively easy to qualify for a loan. Again, the government guarantees the loan, so mortgage lenders are more willing to approve home loans. However, lending companies can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Lompoc 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 Lompoc 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 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 shows 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 mortgage from FHA-approved lenders in Lompoc rather than the FHA itself, which only guarantees the loans. FHA-approved lending institutions can have various rates and expenses, even for the same loan.

FHA loans are available through lots of sources– from the biggest banks and credit unions to community banks and independent home mortgage lending institutions. Expenses, services and underwriting requirements differ amongst lenders or home mortgage brokers, so it’s crucial to search.

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


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