How To Qualify For FHA Loan in Oakley California (Contra Costa County)
Looking for an FHA Loan in Oakley 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 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 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 lending companies with adequate insurance; and to help stimulate the housing market by making mortgages much more accessible and attainable for people with not so great credit or a low down payment due to FHA mortgage limits in Oakley, 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 beneficial 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 Oakley 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 loan.
Consumers 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 circumstances.
Another advantage of an FHA mortgage loan is that it’s an assumable mortgage which means if you want to sell your property, 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 Contra Costa 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 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 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 very little even on a worst case rate change.
About Oakley California
Archeologists have found prehistoric sites in the Oakley area. One substantial shell mound was discovered early in the 20th century near what is now the eastern edge of town. The Northwest Information Center of the California Historical Resources Information System monitors the archeological investigations undertaken in Oakley. Around three dozen such projects have been completed in the past 25 years, yielding only four prehistoric sites in the city. However, the information center believes there is a high possibility that other prehistoric sites remain within the city. To enable further archaeological excavation, the site referred to as Simon Mound was purchased by the Archaeological Conservancy after many of the ancient settlement places had already been destroyed by urban encroachment. Simone Mound has provided bones and fragments from burial sites starting around 1000 A.D. and is near a similar Conservancy preserve, the Hotchkiss Mound.
The first accounts of identifiable cultural community in the west delta are attributed to the Bay Miwoks, who occupied the region between 1100 and 1770 AD. The Bay Miwok people, usually called the Julpunes or Pulpunes by European explorers, were organized into “tribelets”—political units that included several fairly permanent villages and a set of seasonal campsites arrayed across a well-defined territory.
Incursions of the Spanish Empire into the Oakley area began in the 1770s. The first group to enter the present-day city limits was the De Anza expedition of 1775–76. However, after a failed attempt to find a route through the tule swamps to the Sierra, the De Anza expedition returned to Monterey. Subsequent expeditions by the Spanish did not result in colonization. Europeans settled in the Delta in the 19th century, but were killed by malaria and smallpox.
Oakley’s first post office was established in 1898.
Oakley became an incorporated city in 1999.
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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 Contra Costa 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 likewise guarantees other loan programs used by personal lenders. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help homebuyers acquire a house– and renovate it– all with a single home mortgage. Property owners can likewise use the program to refinance their existing home loan and include the expense of remodeling jobs into the brand-new loan. FHA 203( k) loans been available in two types:
- The minimal 203( k) has a much easier application process, and the repairs or improvements should amount to $35,000 or less.
- The basic 203( k) needs extra paperwork and applies to improvements costing more than $5,000, but the overall worth of the home must still fall within the FHA mortgage limitation for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan 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 quantity that will be readily available for withdrawal varies by borrower and depends on the age of the youngest debtor or eligible non-borrowing spouse, current rate of interest and the lower of the home’s evaluated value or the HECM FHA home loan limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home loans backed by the FHA allow property buyers to acquire houses that are currently energy efficient, such as EnergyStar-certified structures. Or they can be utilized to purchase and remodel older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a bigger down payment.
- FHA Section 245( a) loan – Also known as the Graduated Payment Mortgage, this program is geared at customers whose incomes will increase gradually. You begin with smaller monthly payments that slowly go up. Five particular plans are available: three plans that enable 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 each year.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the floor limitation 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 back. These limitations are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit amounts each year in action to changing home rates.
FHA is required by law to change its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for standard home loans guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limits vary according to the expense of living in a particular location, and can be different from one county to the next. Areas with a greater expense of living will have higher limits, and vice versa. Unique exceptions are produced housing in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more costly.
FHA Loan Relief
Loan servicers can use some flexibility on FHA loan requirements to those who have suffered a major financial hardship or are having a hard time to make their payments.
That relief might be in the form of a momentary period of forbearance, a loan modification that would decrease the interest rate, extend the payback duration, or delay 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 Oakley CA?
The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so lenders are more willing to approve home loans. However, mortgage lenders can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Oakley CA, you might have better luck with another.
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 Oakley 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 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 home loans from FHA-approved lenders in Oakley rather than the FHA itself, which only insures the loans. FHA-approved lending institutions can have various rates and costs, even for the exact same loan.
FHA loans are available through numerous sources– from the most significant banks and cooperative credit union to community banks and independent mortgage lending institutions. Expenses, services and underwriting requirements vary among lending institutions or mortgage brokers, so it’s essential to look around.
Learn more about how to discover low FHA home loan loan provider.