How To Qualify For FHA Loan in Portola Valley California (San Mateo County)
Looking for an FHA Loan in Portola Valley California?
An FHA loan is a home loan that’s insured 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 credit 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 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 rise of foreclosures and defaults that happened in 1930s; to provide mortgage companies with sufficient insurance; and to help stimulate 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 Portola Valley, 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 mortgage payments.
Because of that insurance, mortgage lenders can, and do, offer FHA home loans at beneficial 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 Portola Valley 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 loan.
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 scenario.
Another advantage of an FHA home loan is that it’s an assumable home loan 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 Mateo 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 mortgage loan programs will make it possible for 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 adjusts annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products permit 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 Portola Valley California
Portola Valley was named for Spanish explorer Gaspar de Portolá, who led the first party of Europeans to explore the San Francisco Peninsula in 1769.
The Native Americans already present were Ohlone and specifically the group (or groups) known as Olpen or Guemelento but these were later moved to Mission Dolores and Mission Santa Clara de Asís which claimed the land and peoples.
The area’s written history dates back to 1833, when a square league of land was given to Domingo Peralta and Máximo Martínez by Governor José Figueroa to form the Rancho Cañada del Corte de Madera. In those days it was used for lumbering and cattle grazing.
By the 1880s Andrew S. Hallidie, a wire rope manufacturer, had built his country home of Eagle Home Farm in what is now Portola Valley. He built a 7,341 foot long aerial tramway from his house to the top of Skyline in 1894 though it was removed after his death in 1900.
In 1886 the name Portola-Crespi Valley was bestowed on the area from the then community of Crystal Springs (now under Crystal Springs Reservoir to the then community of Searsville (in the area of the present day Jasper Ridge Biological Preserve); Crespi is for Juan Crespí, a Franciscan friar with the Portolà expedition.
The town was incorporated in 1964. Bill Lane was the first mayor.
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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 San Mateo 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 insures other loan programs provided by personal lending institutions. 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 home mortgage. House owners can likewise use the program to re-finance their existing home loan and include the expense of redesigning tasks into the brand-new loan. FHA 203( k) loans can be found in two types:
- The limited 203( k) has a simpler application process, and the repair work or improvements need to amount to $35,000 or less.
- The basic 203( k) needs additional documentation and applies to improvements costing more than $5,000, however the total worth of the residential or commercial property should still fall within the FHA home mortgage limit for the location.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is also insured by the FHA. A HECM permits older property owners (aged 62 and up) with substantial 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 customer and depends on the age of the youngest borrower or qualified non-borrowing partner, current interest rates and the lower of the house’s assessed worth or the HECM FHA home mortgage limitation or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow homebuyers to purchase homes that are already energy effective, such as EnergyStar-certified structures. Or they can be used to buy and redesign older houses with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a bigger deposit.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase over time. You start out with smaller sized month-to-month payments that slowly increase. 5 particular strategies are offered: 3 plans that allow five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. 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 floor limitation for FHA loans in most 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 limitations are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit quantities each year in reaction to changing home 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 traditional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations differ according to the cost of living in a particular location, and can be different from one county to the next. Locations with a higher expense of living will have greater limitations, and vice versa. Unique exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more costly.
FHA Loan Relief
Loan servicers can use some versatility 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 temporary period of forbearance, a loan adjustment that would lower the interest rate, extend the repayment 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 Portola Valley CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so lenders are more willing to approve loans. However, lending companies can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Portola Valley 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 Portola Valley to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the loan but these loans are geared towards lower income applicants. If you’re lucky 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 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
Borrowers get their mortgage from FHA-approved lenders in Portola Valley instead of the FHA itself, which just guarantees the loans. FHA-approved loan providers can have different rates and costs, even for the very same loan.
FHA loans are readily available through lots of sources– from the most significant banks and cooperative credit union to community banks and independent home mortgage loan providers. Costs, services and underwriting requirements vary among lenders or mortgage brokers, so it’s essential to search.
Find out more about how to discover low FHA mortgage lending institution.
