How To Qualify For FHA Loan in Milpitas California (Santa Clara County)
Looking for an FHA Loan in Milpitas 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 mortgages require flexible 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 FICO score can be between 500 – 579 if a 10% down payment is made. It’s significant to remember though, that the lower the credit rating, the higher the interest borrowers will pay. 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 mortgage companies with sufficient insurance; and to help spark the housing market by making home loans highly accessible and attainable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Milpitas, California. Essentially, the federal government insures loans for FHA-approved mortgage lenders in order to reduce their risk of loss if a borrower defaults on their home loan payments.
Because of that insurance, lenders 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.
(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 Milpitas 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.
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 scenario.
Another advantage of an FHA home 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 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 vigorous with respect to gifts for down-payment. Very few home 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 procedure.
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 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 very little even on a worst case rate change.
About Milpitas California
Milpitas was first inhabited by Tamien people, a subgroup of the Ohlone people who had resided in the San Francisco Bay Area for thousands of years. The Ohlone Indians lived a traditional life based on everyday hunting and gathering. Some of the Ohlone lived in various villages within what is now Milpitas, including sites underneath what are now the Calvary Assembly of God Church and Higuera Adobe Park. Archaeological evidence gathered from Ohlone graves at the Elmwood Correctional Facility in 1993 revealed a rich trade with other tribes from Sacramento to Monterey.
During the Spanish expeditions of the late 18th century, several missions were founded in the San Francisco Bay Area. During the mission period, Milpitas served as a crossroads between Mission San José de Guadalupe in present-day Fremont and Mission Santa Clara de Asis in present-day Santa Clara. The land of modern-day Milpitas was divided between the 6,353-acre (25.71 km) Rancho Rincon de Los Esteros (Spanish for “corner of the wetlands”) granted to Ignacio Alviso; the 4,457.8-acre (18.040 km2) Rancho Milpitas (Spanish for “little corn fields”) granted to José María Alviso; and the 4,394.35-acre (17.7833 km) Rancho Los Tularcitos (Spanish for “little tule marshes”) granted to José Higuera. Jose Maria Alviso was the son of Francisco Xavier Alviso and Maria Bojorquez, both of whom arrived in San Francisco as children with the de Anza Expedition. José María Alviso is considered to be the founder of Milpitas. Due to Jose Maria Alviso’s descendants’ difficulty securing his claims to the Rancho Milpitas property, portions of his land were either swindled from the Alviso family or were sold to American settlers to pay for legal fees.
Both landowners had built prominent adobe homes on their properties. Today, both adobes still exist and are the oldest structures in Milpitas. The seriously eroded walls of the Jose Higuera Adobe, now in Higuera Adobe Park, are encapsulated in a brick shell built c. 1970 by Marian Weller, a descendant of pioneer Joseph Weller.
The Alviso Adobe can be seen mostly in its original form, with one kitchen addition made by the Cuciz family after they purchased the adobe from the Gleason family in 1922. Prior to the city acquiring the Alviso Adobe in 1995, it was the oldest continuously occupied adobe house in California dating from the Mexican period and today is still gradually being restored and undergoing seismic upgrades by the City of Milpitas. Alviso Adobe History Park is to be opened, after the exterior restoration of the adobe and outbuildings is completed, as an educational museum with historic items, trees, buildings, and documents.
In the 1850s, large numbers of Americans of English, German, and Irish descent arrived to farm the fertile lands of Milpitas. The Burnett, Rose, Dempsey, Jacklin, Trimble, Ayer, Parks, Wool, Weller, Minnis, and Evans families are among the early settlers of Milpitas. (Today many schools, streets, and parks have been named in honor of these families.) These early settlers farmed the land that was once the ranchos. Some set up businesses on what was then called Mission Road (now called Main Street) between Calaveras Road (now called Carlo Street) and the Alviso-Milpitas Road (now called Serra Way). By the late 20th century this area became known as the “Midtown” district. Yet another influx of immigration came in the 1870s and 1880s as Portuguese sharecroppers from the Azores came to farm the Milpitas hillsides. Many of the Azoreans had such locally well-known surnames as Coelho, Covo, Mattos, Nunes, Spangler, Serpa, and Silva.
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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 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 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.
(Or call 213-474-7389 to ask a local lender anything!)
Types of FHA Loans
In addition to its popular FHA loan, the FHA also guarantees other loan programs provided by private loan providers. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers acquire a home– and refurbish it– all with a single home mortgage. House owners can also use the program to refinance their current home loan and include the cost of renovating tasks into the new loan. FHA 203( k) loans can be found in 2 types:
- The minimal 203( k) has a much easier application procedure, and the repair work or improvements need to total $35,000 or less.
- The basic 203( k) needs extra paperwork and applies to enhancements costing more than $5,000, but the total worth of the residential or commercial property must still fall within the FHA home loan limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse home mortgage and is also insured by the FHA. A HECM allows older homeowners (aged 62 and up) with significant equity or those who own their houses outright to withdraw a portion of their home’s equity. The quantity that will be offered for withdrawal varies by customer and depends on the age of the youngest borrower or qualified non-borrowing partner, current interest rates and the lesser of the house’s assessed worth or the HECM FHA home loan limit or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA permit homebuyers to buy houses that are currently energy efficient, 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 costs of the upgrades into the loan without a larger deposit.
- FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is tailored at borrowers whose earnings will increase with time. You begin with smaller regular monthly payments that slowly increase. 5 specific plans are readily available: 3 plans that permit 5 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 every year.
(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 the majority of the nation 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 limitations are described as “ceilings” and “floors” that FHA will insure. FHA updates restrict amounts each year in action to changing home rates.
FHA is required by law to adjust its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional home mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits differ according to the cost of living in a specific area, and can be different from one county to the next. Areas with a greater expense of living will have greater limitations, and vice versa. Unique exceptions are produced housing in Alaska, Hawaii, Guam and the Virgin Islands, where home building and construction is more expensive.
FHA Loan Relief
Loan servicers can use some flexibility on FHA loan requirements to those who have actually suffered a major financial hardship or are having a hard time to make their payments.
That relief might be in the form of a short-lived duration of forbearance, a loan modification that would lower the rate of interest, extend the repayment 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 Milpitas CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so lending companies are more willing to approve home loans. 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 Milpitas 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 Milpitas to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage 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
Customers get their home loans from FHA-approved lending institutions in Milpitas rather than the FHA itself, which only insures the loans. FHA-approved lending institutions can have various rates and costs, even for the very same loan.
FHA loans are offered through numerous sources– from the greatest banks and credit unions to neighborhood banks and independent home mortgage lending institutions. Costs, services and underwriting standards vary amongst loan providers or mortgage brokers, so it’s important to look around.
Learn more about how to find low FHA home mortgage loan provider.