How To Qualify For FHA Loan in Merrimac California (Butte County)
Looking for an FHA Loan in Merrimac California?
FHA loans have been a flexible home loan program that’s been around since the 1930’s and is protected 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 requirements.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with sufficient insurance; and to help grow the housing market by making home loans more accessible and affordable for home-buyers with less than perfect credit or a low down payment due to FHA mortgage limits in Merrimac, 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 home loans at really attractive mortgage 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.
(Or call 213-474-7389 to ask a local lender anything!)
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan in Merrimac 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 popular option for their personal scenario.
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 Butte 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 loan programs will permit 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 readjusts annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products permit 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 Merrimac California
Coordinates: 39°45′58″N 121°18′27″W / 39.76611°N 121.30750°W
Merrimac (formerly, Merrimack, Pea Vine, and Peavine) was an unincorporated community in Butte County, California located along Oroville-Quincy Road about 2.1 miles (3.4 km) south of the Plumas County line at an elevation of 3999 feet (1219 m). Nearby is Rogers Cow Camp, a campground in Lassen National Forest.
The community was located along Oroville-Quincy Road between the towns of Buckeye and Junction House. As the name implies, the road continues to intersect with State Route 70 in Quincy. This road is also called Forest Service Road 119. It is shown on some modern road maps covering the entire state. Merrimac does not appear on the 1958 State of California highway map.
The Pea Vine post office operated from 1856 to 1864. The Merrimac post office operated from 1883 to 1902 and 1915 to 1934.
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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 Butte 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 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 acquire a home– and remodel it– all with a single mortgage. Property owners can likewise use the program to re-finance their existing home loan and include the cost of renovating projects into the brand-new loan. FHA 203( k) loans been available in 2 types:
- The restricted 203( k) has a simpler application procedure, and the repairs or improvements must total $35,000 or less.
- The standard 203( k) requires extra paperwork and applies to enhancements costing more than $5,000, however the overall value of the residential or commercial property need to still fall within the FHA mortgage limitation for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is likewise guaranteed by the FHA. A HECM enables older homeowners (aged 62 and up) with substantial equity or those who own their homes outright to withdraw a part of their house’s equity. The amount that will be offered for withdrawal differs by debtor and depends upon the age of the youngest borrower or qualified non-borrowing spouse, present rates of interest and the lower of the house’s assessed value or the HECM FHA home mortgage limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home loans backed by the FHA enable property buyers to acquire houses that are already energy efficient, such as EnergyStar-certified buildings. Or they can be utilized to buy and renovate older homes with energy-efficient, or “green,” updates and roll the costs 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 tailored at borrowers whose incomes will increase in time. You start out with smaller monthly payments that gradually go up. Five specific strategies are offered: 3 plans that allow 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.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the flooring limit for FHA loans in most of the country is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year back. These limits are described as “ceilings” and “floors” that FHA will insure. FHA updates limit quantities each year in reaction to altering home rates.
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 mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations vary according to the cost of living in a specific area, and can be various 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 housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building is more costly.
FHA Loan Relief
Loan servicers can use some flexibility on FHA loan requirements to those who have suffered a severe monetary hardship or are having a hard time to make their payments.
That relief might be in the form of a momentary duration of forbearance, a loan adjustment that would decrease the interest rate, 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 Merrimac CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so mortgage lenders are more willing to approve mortgage loans. However, mortgage companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Merrimac CA, you might have better luck with shopping around for a better option.
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 Merrimac 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 borrowers. 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 proves good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
How to Find FHA Lenders
Debtors get their home mortgage from FHA-approved lenders in Merrimac instead of the FHA itself, which only insures the loans. FHA-approved lenders can have various rates and costs, even for the exact same loan.
FHA loans are available through many sources– from the biggest banks and cooperative credit union to neighborhood banks and independent mortgage lenders. Costs, services and underwriting requirements vary amongst loan providers or home mortgage brokers, so it’s important to look around.
Learn more about how to discover low FHA mortgage lending institution.