How To Qualify For FHA Loan in Los Altos Hills California (Santa Clara County)
Looking for an FHA Loan in Los Altos Hills California?
FHA loans have been a flexible home loan 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 lower 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 rating can be between 500 – 579 if a 10% down payment is made. It’s crucial to remember though, that the lower the credit worthiness, 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 lending companies with sufficient insurance; and to help spark the housing market by making home loans much more accessible and attainable for home-buyers with less than stellar credit or a low down payment due to FHA mortgage limits in Los Altos Hills, 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 home loan 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 Los Altos Hills 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.
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 best option for their personal scenario.
Another advantage of an FHA home loan is that it’s an assumable home 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 Clara 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 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 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 minimal even on a worst case rate change.
About Los Altos Hills California
Los Altos Hills is located at 37°22′17″N 122°8′15″W / 37.37139°N 122.13750°W / 37.37139; -122.13750 (37.371390, -122.137605).
According to the United States Census Bureau, the town has a total area of 8.8 square miles (23 km2), all of it land.
The town is located in a work of little hills. Both the Altamont and Monte Vista Faults pass through the town.
Los Altos hills maintains a rural feel, similar to the likes of neighboring Woodside and Portola Valley (see: Strictly Residential). There are many open space preserves, such as Rancho San Antonio and Westwind Barn.
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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 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 Clara 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.
Kinds Of FHA Loans
In addition to its popular FHA loan, the FHA also insures other loan programs offered by personal lending institutions. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans help homebuyers buy a home– and remodel it– all with a single home mortgage. Property owners can likewise use the program to refinance their current home mortgage and add the expense of redesigning tasks into the brand-new loan. FHA 203( k) loans can be found in 2 types:
- The limited 203( k) has a much easier application procedure, and the repair work or enhancements should amount to $35,000 or less.
- The standard 203( k) requires extra paperwork and applies to improvements costing more than $5,000, but the overall worth of the home must still fall within the FHA home loan limitation for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is the most popular type of reverse home loan and is likewise insured by the FHA. A HECM enables older property owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a portion of their home’s equity. The amount that will be offered for withdrawal varies by customer and depends upon the age of the youngest debtor or eligible non-borrowing spouse, current interest rates and the lesser of the home’s evaluated worth or the HECM FHA home mortgage limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow property buyers to buy homes that are already energy effective, such as EnergyStar-certified structures. Or they can be used to buy and renovate older homes with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger deposit.
- 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 with smaller regular monthly payments that slowly increase. Five specific strategies are offered: 3 plans that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent yearly. Two other strategies set payment increases over 10 years at 2 percent and 3 percent annually.
FHA Loan Limits for 2019
For 2019, the floor limit for FHA loans in the majority of the nation is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year earlier. These limits are described as “ceilings” and “floorings” that FHA will insure. FHA updates restrict quantities each year in response to altering house rates.
FHA is needed by law to change its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for traditional home mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations vary according to the expense of living in a certain location, and can be various from one county to the next. Locations with a greater cost of living will have higher limitations, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house building is more expensive.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have suffered a major monetary challenge or are struggling 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 interest rate, extend the payback period, or postpone 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 Los Altos Hills 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, lending companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Los Altos Hills CA, you might have better luck with looking around for 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 Los Altos Hills 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 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 shows good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
How to Find FHA Lenders
Borrowers get their home loans from FHA-approved lending institutions in Los Altos Hills instead of the FHA itself, which only insures the loans. FHA-approved lenders can have different rates and costs, even for the same loan.
FHA loans are readily available through lots of sources– from the most significant banks and credit unions to community banks and independent home mortgage loan providers. Expenses, services and underwriting requirements differ amongst lending institutions or mortgage brokers, so it’s important to shop around.
Discover more about how to discover the best FHA home loan loan provider.