How To Qualify For FHA Loan in Paso Robles California (San Luis Obispo County)
Looking for an FHA Loan in Paso Robles California?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA loans require more 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 FICO score can be between 500 – 579 if a 10% down payment is made. It’s crucial to remember though, that the lower the credit worthiness, 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 qualifications.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide lending companies with sufficient insurance; and to help spark the housing market by making mortgages highly accessible and affordable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Paso Robles, 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 mortgage payments.
Because of that insurance, mortgage lenders can, and do, offer FHA home loans at really attractive 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 Paso Robles 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 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 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 San Luis Obispo 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 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 Paso Robles California
This area of the Central Coast, known as the City of El Paso De Robles, Paso Robles, or simply “Paso”, is known for its thermal springs. Native Americans known as the Salinan lived in the area thousands of years before the mission era. They knew this area as the “Springs” or the “Hot Springs.” A tribal site on present-day Paso Robles was named elewexe, Obispeño for “Swordfish”.
Paso Robles is located on the Rancho Paso de Robles Mexican land grant that was purchased by James and Daniel Blackburn in 1857. Their partner was Drury James of Kentucky, a veteran of the Mexican War and uncle of the outlaw Jesse James. The land was a rest-stop for travelers of the Camino Real trail, and was known for its mineral hot springs. Franciscan priests from neighboring Mission San Miguel constructed the first mineral baths in the area. During this period, Paso Robles began to attract the settlers who established cattle ranches, apple and almond orchards, dairy farms, and vineyards.
In 1864, the first El Paso de Robles Hotel was constructed and featured a hot mineral springs bath house. Three locations (Paso Robles Inn, River Oaks Hot Springs, and Franklin Hot Springs) have offered the mineral bath hot spring experience which brought people like Ignacy Jan Paderewski to Paso Robles.
James and Daniel Blackburn donated two blocks to the city for a public park to be used for the pleasure of its citizens and visitors. By original deed, the land was to revert to the donors if used for any other purpose than a public park. Two exceptions were made: allowing the building of the Carnegie Library, and the conversion of the library to a museum. The grounds were laid out by a Mr. Redington and a planting day was held when each citizen set out his own donation. Originally, the whole park was hedged in by a fence of cactus, and in 1890 a bandstand was built with money raised by private theatricals.
In 1886, after the coming of the Southern Pacific Railroad, work began on laying out a town site, with the resort as the nucleus. Two weeks after the first train arrived on October 31, 1886, a three-day celebration was held including a special train from San Francisco bringing prospective buyers, who toured the area and enjoyed the daily barbecues. On November 17, the “Grand Auction” was held, resulting in the sale of 228 lots.
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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 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 San Luis Obispo 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 likewise guarantees other loan programs provided by private 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 remodel it– all with a single mortgage. Property owners can likewise utilize the program to re-finance their existing mortgage and add the expense of redesigning projects into the new loan. FHA 203( k) loans can be found in two types:
- The restricted 203( k) has a simpler application process, and the repairs or enhancements should amount to $35,000 or less.
- The basic 203( k) requires additional paperwork and applies to improvements costing more than $5,000, but the overall worth of the property need to still fall within the FHA mortgage limit for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise guaranteed by the FHA. A HECM enables older house owners (aged 62 and up) with substantial 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 debtor or qualified non-borrowing partner, existing rates of interest and the lesser of the home’s appraised worth or the HECM FHA home loan limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA permit homebuyers to purchase homes that are already energy effective, such as EnergyStar-certified buildings. Or they can be used to purchase and remodel older houses with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a bigger deposit.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is tailored at customers whose incomes will increase over time. You begin with smaller sized month-to-month payments that slowly go up. 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. 2 other strategies set payment increases 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 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 earlier. These limits are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit quantities each year in response to altering house prices.
FHA is required by law to adjust its amounts based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for conventional home mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations vary according to the cost of living in a particular area, and can be different 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 house building and construction is more pricey.
FHA Loan Relief
Loan servicers can provide some flexibility on FHA loan requirements to those who have suffered a serious monetary difficulty or are struggling to make their payments.
That relief might be in the form of a momentary period of forbearance, a loan adjustment that would lower the rate of interest, extend the repayment duration, 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 Paso Robles CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so mortgage companies are more willing to approve loans. However, lenders can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Paso Robles CA, you might have better luck with another.
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 Paso Robles to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the home loan 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 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 shows 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 mortgage from FHA-approved lenders in Paso Robles instead of the FHA itself, which just insures the loans. FHA-approved lenders can have different rates and expenses, even for the same loan.
FHA loans are readily available through lots of sources– from the biggest banks and credit unions to neighborhood banks and independent home loan lending institutions. Costs, services and underwriting requirements differ amongst loan providers or home mortgage brokers, so it’s crucial to shop around.
Find out more about how to find low FHA mortgage loan provider.