How To Qualify For FHA Loan in Petaluma California (Sonoma County)

How To Qualify For FHA Loan in Petaluma California (Sonoma County)

Looking for an FHA Loan in Petaluma 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 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 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 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 highly accessible and affordable for home-buyers with less than stellar credit or a low down payment due to FHA mortgage limits in Petaluma, 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.


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Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements

FHA Loan in Petaluma

Typically an FHA loan in Petaluma 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 home loan.

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 mortgage is that it’s an assumable home 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 Sonoma 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 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 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 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 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 minimal even on a worst case rate change.

About Petaluma California

The Coast Miwok resided throughout Marin and southern Sonoma County. The village of Péta Lúuma (Coast Miwok for “backside of the hill”) was east of the Petaluma River, with a number of other Coast Miwok villages nearby: Wotoki was immediately to the south of Péta Lúuma , on the opposite side of the river; Etem, Likatiut, and Tuchayalin were near today’s downtown; and Tulme and Susuli were just north of today’s city limits.

The Petaluma area was part of a 66,000-acre (270 km) 1834 Mexican land grant by Governor Jose Figueroa to Mariano Guadalupe Vallejo called Rancho Petaluma. In 1836, Vallejo ordered construction of his Rancho Petaluma Adobe, a ranch house in Petaluma, which his family often used as a summer home, while he resided in the neighboring town of Sonoma. Vallejo’s influence and Mexican control in the region began to decline after Vallejo’s arrest during the Bear Flag Revolt in 1846.

Pioneers moved to Petaluma from the eastern United States after James Marshall found gold in the Sierra Nevada in 1848. The town’s position on the Petaluma River in the heart of productive farmland was critical to its growth during the 19th and early 20th centuries. Sailing scows, such as the scow schooner Alma (1892), and steamers plied the river between Petaluma and San Francisco, carrying agricultural produce and raw materials to the burgeoning city of San Francisco during the California Gold Rush.

There were brothels downtown along Petaluma Boulevard, which used to be the main thoroughfare until U.S. Highway 101 was constructed in the 1950s. The Petaluma Historic Commercial District is listed on the National Register of Historic Places.

The Sonoma County Bank Building was the home of the Baker Creek Heirloom Seed Company and the Petaluma Seed Bank until 2019. It was built in 1926.

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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 Sonoma 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 Mortgage Loans

In addition to its popular FHA loan, the FHA likewise insures other loan programs provided by private lending institutions. Here’s a take a look at each of them.

  • FHA 203( k) loans – These FHA loans help property buyers purchase a home– and renovate it– all with a single mortgage. House owners can likewise utilize the program to refinance their current home loan and include the cost of remodeling jobs into the brand-new loan. FHA 203( k) loans can be found in 2 types:
    • The limited 203( k) has a simpler application process, and the repair work or improvements must amount to $35,000 or less.
    • The basic 203( k) needs additional paperwork and applies to enhancements costing more than $5,000, however the total value of the home must still fall within the FHA home loan limitation for the area.
  • House Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is also insured by the FHA. A HECM allows older homeowners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a portion of their home’s equity. The amount that will be offered for withdrawal differs by borrower and depends on the age of the youngest customer or qualified non-borrowing partner, existing rate of interest and the lesser of the house’s assessed worth or the HECM FHA mortgage limit or prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA permit property buyers to acquire homes that are already energy effective, 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 bigger deposit.
  • FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase with time. You start with smaller sized regular monthly payments that slowly increase. Five specific plans are available: 3 strategies that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other plans set payment increases over 10 years at 2 percent and 3 percent annually.

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FHA Loan Limits for 2022

For 2019, the floor limit for FHA loans in most 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 earlier. These limitations are referred to as “ceilings” and “floorings” that FHA will insure. FHA updates limit quantities each year in reaction to changing house rates.

FHA is needed by law to adjust its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for standard home loans 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 various from one county to the next. Areas with a higher expense of living will have higher limits, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home building is more costly.

FHA Loan Relief

Loan servicers can offer some flexibility on FHA loan requirements to those who have actually suffered a major financial challenge or are having a hard time to make their payments.

That relief might be in the form of a short-term duration of forbearance, a loan modification that would reduce the interest rate, 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 Petaluma CA?

The FHA makes it relatively simple to qualify for a mortgage loan. 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 Petaluma CA, you might have better luck with looking around for 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 Petaluma 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 demonstrates 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 Petaluma instead of the FHA itself, which just guarantees the loans. FHA-approved lenders can have various rates and expenses, even for the very same loan.

FHA loans are available through numerous sources– from the greatest banks and cooperative credit union to community banks and independent mortgage loan providers. Expenses, services and underwriting standards differ amongst loan providers or home loan brokers, so it’s crucial to search.

Discover more about how to discover low FHA home mortgage lender.


(Or call 213-474-7389 to ask a local lender anything!)