How To Qualify For FHA Loan in Lone Star California (Glenn County)

How To Qualify For FHA Loan in Lone Star California (Glenn County)

Looking for an FHA Loan in Lone Star 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). They are popular especially among first time home buyers because they allow down payments of 3.5% for credit scores of 580+.

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 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 increase of foreclosures and defaults that happened in 1930s; to provide lenders with adequate insurance; and to help grow the housing market by making home loans more accessible and affordable for consumers with less than perfect credit or a low down payment due to FHA mortgage limits in Lone Star, 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 mortgage payments.

Because of that insurance, mortgage companies 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.

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

Typically an FHA loan in Lone Star 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.

Borrowers 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 best option for their personal scenario.

Another advantage of an FHA mortgage 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.

>> CHECK FHA ELIGIBILITY NOW <<

(Or call 562-502-1502 to ask a local lender anything!)

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 Glenn 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 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 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 period. 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 very little even on a worst case rate change.

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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 Glenn 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.

>> CHECK FHA ELIGIBILITY NOW <<

(Or call 562-502-1502 to ask a local lender anything!)

Kinds Of FHA Loans

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

  • FHA 203( k) loans – These FHA loans assist homebuyers buy a house– and remodel it– all with a single home mortgage. Homeowners can also utilize the program to refinance their existing mortgage and include the expense of renovating projects into the new loan. FHA 203( k) loans come in 2 types:
    • The limited 203( k) has a much easier application procedure, and the repairs or improvements need to amount to $35,000 or less.
    • The basic 203( k) needs additional documents and applies to enhancements costing more than $5,000, but the total worth of the residential or commercial property need to still fall within the FHA home loan limitation for the location.
  • Home Equity Conversion Mortgage, or HECM – A HECM is the most popular type of reverse home mortgage and is likewise guaranteed by the FHA. A HECM allows older property owners (aged 62 and up) with significant equity or those who own their houses outright to withdraw a part of their home’s equity. The amount that will be readily available for withdrawal varies by customer and depends on the age of the youngest debtor or qualified non-borrowing partner, existing interest rates and the lesser of the home’s assessed value or the HECM FHA mortgage limitation or prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective home 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 used to purchase and renovate older houses 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 called the Graduated Payment Mortgage, this program is tailored at debtors whose earnings will increase over time. You start out with smaller sized monthly payments that slowly go up. Five specific strategies are offered: 3 strategies that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other plans set payment boosts over 10 years at 2 percent and 3 percent yearly.

FHA Loan Limits for 2022

For 2019, the floor limitation 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 earlier. These limitations are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit amounts each year in reaction to changing home rates.

FHA is needed by law to change its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits differ according to the expense of living in a specific area, and can be different from one county to the next. Areas with a higher cost of living will have greater limits, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building and construction is more costly.

FHA Loan Relief

Loan servicers can offer some versatility on FHA loan requirements to those who have actually suffered a severe financial hardship or are having a hard time to make their payments.

That relief might be in the form of a short-term duration of forbearance, a loan adjustment that would lower the rates of interest, extend the payback period, or defer 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 Lone Star CA?

The FHA makes it relatively easy to qualify for a mortgage. Again, the government guarantees the loan, so lenders are more willing to approve loans. However, lenders can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Lone Star 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 Lone Star to find out for sure.

Income limits: there are none. You’ll need enough to show that you can repay the mortgage 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 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

Debtors get their mortgage from FHA-approved lending institutions in Lone Star rather than the FHA itself, which just insures the loans. FHA-approved loan providers can have different rates and costs, even for the exact same loan.

FHA loans are offered through numerous sources– from the biggest banks and cooperative credit union to community banks and independent home loan lending institutions. Expenses, services and underwriting standards vary amongst lenders or home loan brokers, so it’s crucial to shop around.

Learn more about how to find the very best FHA mortgage lending institution.

>> CHECK FHA ELIGIBILITY NOW <<

(Or call 562-502-1502 to ask a local lender anything!)

Have Questions?

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