How To Qualify For FHA Loan in Lucia California (Monterey County)

How To Qualify For FHA Loan in Lucia California (Monterey County)

Looking for an FHA Loan in Lucia California?

An FHA loan is a mortgage that’s 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 score 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 rise of foreclosures and defaults that happened in 1930s; to provide lenders with adequate insurance; and to help spark the housing market by making home loans much more accessible and affordable for home-buyers with less than perfect credit or a low down payment due to FHA mortgage limits in Lucia, 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 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.


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

FHA Loan in Lucia

Typically an FHA loan in Lucia 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 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 Monterey 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 procedure.

The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then readjusts annually after the initial fixed period. 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 modification. This insures that the payment adjustment will be minimal even on a worst case rate change.

About Lucia California

The land may have first been occupied the Salinan Antonianos subtribe who are believed to have lived on the coast and inland as far north as Soledad. It’s believed the northern limit of the tribe along the Santa Lucia Mountains is Junipero Serra Peak, east of Slates Hot Springs. The Salinan named it Pimkolam. The tribe’s name is taken from the Salinas River, as the tribe did not appear to have a name for themselves.

Wilber Judson Harlan was born on December 14, 1860 in Rushville, Rush, Indiana. His father died when he was 21, and Wilber moved to Santa Cruz, California where his half-sister Hester Ann lived with her husband C. J. Todd. After working in a local nursery and on a threshing machine crew in the Salinas Valley, he homesteaded 167 acres (68 ha) on the south Big Sur coast.

Wilber Harlan grew up on a ranch owned by his parents George and Esther Harlan on Lopez Point. His mother first arrived in the Big Sur area from San Jose in 1913 to become a school teacher at the Redwood School. George volunteered to meet the new teacher at the King City rail road station in the Salinas Valley. He brought her to the coast on a two-day horseback trip that included an overnight stay in Wagon Cave in the upper San Antonio River valley. They married and settled on the land in 1876.

When Esther was ready to give birth, she left the coastal family ranch and visited her mother in Campbell, California until the baby was born. She returned south a week after her son Stan’s birth. On the final leg of the trip, over the narrow mountain trails, he was placed in a five-gallon kerosene can, which had one side cut out and lined with blankets, then placed and tied on the pack saddle of George’s favorite mule, Big Jack.

In 1885, Harlan homesteaded in Big Sur and filed his claim of 167 acres (68 ha) in the San Francisco Land Office.

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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 annual 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 Monterey 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 Home Loans

In addition to its popular FHA loan, the FHA also insures other loan programs used by personal loan providers. Here’s a take a look at each of them.

  • FHA 203( k) loans – These FHA loans help property buyers buy a home– and renovate it– all with a single home mortgage. Homeowners can also utilize the program to refinance their current home loan and add the cost of remodeling jobs into the brand-new loan. FHA 203( k) loans can be found in 2 types:
    • The limited 203( k) has a simpler application procedure, and the repairs or enhancements need to amount to $35,000 or less.
    • The standard 203( k) needs extra documents and applies to enhancements costing more than $5,000, but the total value of the property need to still fall within the FHA home mortgage limitation for the location.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is also insured by the FHA. A HECM allows older homeowners (aged 62 and up) with considerable equity or those who own their homes outright to withdraw a part of their home’s equity. The quantity that will be offered for withdrawal varies by borrower and depends on the age of the youngest customer or eligible non-borrowing spouse, existing rates of interest and the lower of the home’s evaluated worth or the HECM FHA home mortgage limit or list prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA enable property buyers to acquire houses that are currently energy effective, such as EnergyStar-certified buildings. Or they can be utilized to purchase and renovate older homes 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 called the Graduated Payment Mortgage, this program is tailored at borrowers whose earnings will increase with time. You start out with smaller sized monthly payments that gradually increase. 5 particular strategies are available: three strategies that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. Two other strategies set payment boosts over 10 years at 2 percent and 3 percent annually.

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FHA Loan Limits for 2022

For 2019, the flooring 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 ago. These limits are described as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict quantities each year in response to altering home costs.

FHA is required by law to adjust its amounts based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for conventional home mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limits vary according to the cost of living in a particular area, and can be different from one county to the next. Locations with a greater expense 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 home building 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 struggling to make their payments.

That relief might be in the form of a short-term period of forbearance, a loan modification that would decrease the rates of interest, extend the repayment 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 Lucia CA?

The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve mortgages. However, mortgage companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Lucia CA, you might have better luck with shopping around for a better option.

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 Lucia 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 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 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 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

Borrowers get their mortgage from FHA-approved lenders in Lucia rather than the FHA itself, which only guarantees the loans. FHA-approved loan providers can have different rates and expenses, even for the same loan.

FHA loans are available through lots of sources– from the most significant banks and credit unions to community banks and independent home mortgage lending institutions. Costs, services and underwriting standards vary among lenders or home loan brokers, so it’s essential to look around.

Discover more about how to find low FHA home loan lending institution.


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