How To Qualify For FHA Loan in Pasatiempo California (Santa Cruz County)
Looking for an FHA Loan in Pasatiempo California?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA home loans require flexible minimum credit scores and down payments than many commonplace 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 significant to remember though, that the lower the credit rating, 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 increase of foreclosures and defaults that happened in 1930s; to provide mortgage companies with adequate insurance; and to help grow the housing market by making mortgages more accessible and attainable for home-buyers with less than perfect credit or a low down payment due to FHA mortgage limits in Pasatiempo, 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 mortgages at beneficial 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 Pasatiempo 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 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 home loan is that it’s an assumable loan which means if you want to sell your home, 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 Cruz 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 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 adjusts annually after the initial fixed time frame. The 3/1 and 5/1 FHA Hybrid products make it possible for 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 Pasatiempo California
Pasatiempo was founded by Marion Hollins, winner of the 1921 Women’s U.S. Amateur Golf title and captain of the US Curtis Cup team in 1932. Marion Hollins came to California in the mid-1920s to work for Samuel Morse, owner of the Pebble Beach company, and given responsibility for establishing Cypress Point golf club. After Seth Raynor died, she hired Alister MacKenzie to design the course. MacKenzie gives her credit for designing Cypress Point’s famous par 3 16th hole.
After Cypress Point, Marion Hollins set out to build her own golf course and sports center, and on January 12, 1928 she announced that she would be building a sports and real estate complex on land just outside Santa Cruz, CA, calling the area Pasatiempo Estates. She hired noted architect William Wurster to build her home, which still stands today at 33 Hollins Drive inside Pasatiempo. She also brought in Alister MacKenzie to design a course at Pasatiempo Golf Club, which opened in September 1929 with a match featuring Bobby Jones MacKenzie established his home in Pasatiempo, which still stands along the 6th Fairway of the course on Pasatiempo Drive. Pasatiempo Golf Club is located in the community.
Although Marion Hollins’ plans for Pasatiempo originally included a steeplechase course, bridle paths, a park and a beach club on Monterey Bay, her ambitious plans were thwarted by the Great Depression. In November 1940, she left Pasatiempo in a shakeup of Pasatiempo Estates and moved to Monterey, where she died of cancer. Today, Pasatiempo Golf Club remains a Top 100 Golf Club, and the development still has the original clubhouse (now called the “Hollins House”), a swimming pool, and tennis courts.
According to the United States Census Bureau, the CDP covers an area of 0.9 square miles (2.3 km), all of it land.
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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 property. 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 Cruz 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 Mortgage Loans
In addition to its popular FHA loan, the FHA likewise guarantees other loan programs used by private lenders. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help property buyers buy a house– and refurbish it– all with a single home loan. House owners can likewise use the program to re-finance their current home mortgage and add the cost of remodeling tasks into the 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 should amount to $35,000 or less.
- The basic 203( k) needs additional documents and applies to improvements costing more than $5,000, but the total worth of the home must still fall within the FHA mortgage limit for the location.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home mortgage and is also insured by the FHA. A HECM enables 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 amount that will be available for withdrawal differs by customer and depends upon the age of the youngest customer or qualified non-borrowing spouse, existing rate of interest and the lower of the home’s assessed worth or the HECM FHA mortgage limitation or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA permit property buyers to buy homes that are already energy effective, such as EnergyStar-certified structures. Or they can be used to purchase and remodel older houses 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 known as the Graduated Payment Mortgage, this program is tailored at debtors whose incomes will increase in time. You start out with smaller sized regular monthly payments that gradually go up. Five particular plans are offered: three plans that enable 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 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 2022
For 2019, the floor limitation 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 ago. These limits are described as “ceilings” and “floors” that FHA will insure. FHA updates limit quantities each year in action to changing house costs.
FHA is required by law to adjust its quantities 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 limitations differ according to the expense of living in a particular location, and can be various from one county to the next. Areas with a higher 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 home building and construction is more pricey.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have suffered a severe financial hardship or are struggling to make their payments.
That relief might be in the form of a temporary duration of forbearance, a loan adjustment that would reduce the rates of interest, extend the repayment period, 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 Pasatiempo CA?
The FHA makes it relatively easy to qualify for a home loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve home loans. However, mortgage companies can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Pasatiempo 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 Pasatiempo 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 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 requirements 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 demonstrates 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 mortgage from FHA-approved lending institutions in Pasatiempo instead of the FHA itself, which just insures the loans. FHA-approved lenders can have various rates and costs, even for the very same loan.
FHA loans are readily available through many sources– from the most significant banks and credit unions to community banks and independent home mortgage lending institutions. Expenses, services and underwriting standards vary among lending institutions or home loan brokers, so it’s crucial to shop around.
Learn more about how to discover low FHA home mortgage lending institution.