How To Qualify For FHA Loan in Prunedale California (Monterey County)

How To Qualify For FHA Loan in Prunedale California (Monterey County)

Looking for an FHA Loan in Prunedale California?

FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is 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 rating can be between 500 – 579 if a 10% down payment is made. It’s crucial 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 requirements.

The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide lenders with sufficient insurance; and to help grow the housing market by making home loans more accessible and affordable for people with less than perfect credit or a low down payment due to FHA mortgage limits in Prunedale, 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 Prunedale 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.

Consumers 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 mortgage loan is that it’s an assumable mortgage 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 Monterey 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 loan programs will permit 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 adjustment. This insures that the payment adjustment will be very little even on a worst case rate change.

About Prunedale California

One of the area’s earliest settlers was Charles Langley, a Watsonville banker, who also operated the Prunedale post office. The Prunedale post office opened in 1894, closed in 1908, and re-opened in 1953. Langley helped establish the Watsonville post office mail service in Prunedale. Langley Canyon Road in Prunedale is named after the Langley family. It was around the time of Prunedale’s founding that the plum orchard failed due to a lack of irrigation and fertilizer, yet the name Prunedale was retained. The unincorporated area maintains a rural feel in most areas.

A major development in the area’s history occurred when U.S. Route 101 was rerouted through Prunedale between 1931 and 1932. U.S. Highway 101 had previously routed directly from Salinas to San Juan Bautista. That old route is now known as San Juan Grade Road. In 1946, Highway 101 was widened to 4 lanes. As Prunedale has grown, increased traffic congestion made Route 101 through Prunedale a Traffic Safety Corridor and a double traffic fine zone in the late 1990s and early 2000s, with reduced speed limits to 55 miles per hour. Detailed plans to build a 101 bypass of Prunedale did not develop. After Caltrans purchased the land for the bypass, it was resolved to improve the highway through Prunedale by adding a San Miguel Canyon overpass, improving the Highway 101 and Highway 156 interchange, making more turn and merge lanes, and making several other improvements on the roadway. These improvements were completed in the early 2000s. In the last few years, with a decline in traffic fatalities, the speed limit was increased to 60 miles per hour via state traffic formulas.

One of the original businesses to inhabit Prunedale was Glenn’s. In the 1970s, the Prunedale Shopping Center was built. The Prunedale Senior Citizen’s Center was built in 1989 with grant funds secured by then Monterey County Supervisor Marc Del Piero. Meals for seniors and public assistance programs, including a bi-weekly food bank giveaway, continue to be operated from that facility. In the 1980s, the Prunetree Shopping Center opened for business.

Prunedale is located at 36°46′33″N 121°40′11″W / 36.77583°N 121.66972°W / 36.77583; -121.66972.

According to the United States Census Bureau, the CDP has a total area of 46.2 square miles (120 km), of which, 46.1 square miles (119 km2) of it is land and 0.1 square miles (0.26 km) of it (0.32%) is water. Langley Creek flows by Highway 101 through Prunedale, and is visible at the intersection of Highway 101 and Tustin Road, and again at the intersection of Prunedale South Road and Blackie Road.

Other Cities You May Be Interested In

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 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 Monterey 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 Home Loans

In addition to its popular FHA loan, the FHA also 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 assist homebuyers purchase a home– and refurbish it– all with a single home mortgage. House owners can also use the program to re-finance their current home loan and add the expense of redesigning projects into the brand-new loan. FHA 203( k) loans come in two types:
    • The restricted 203( k) has a much easier application procedure, and the repair work or enhancements need to amount to $35,000 or less.
    • The basic 203( k) requires additional paperwork and applies to enhancements costing more than $5,000, but the total worth of the property need to still fall within the FHA home loan limit for the location.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse mortgage and is also guaranteed by the FHA. A HECM allows older homeowners (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 available for withdrawal differs by debtor and depends on the age of the youngest debtor or qualified non-borrowing partner, existing rate of interest and the lower of the house’s assessed worth or the HECM FHA mortgage limit or list prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective mortgages backed by the FHA enable homebuyers to purchase homes that are already energy efficient, such as EnergyStar-certified structures. Or they can be used to buy and renovate older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a larger deposit.
  • FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is tailored at borrowers whose incomes will increase in time. You start out with smaller month-to-month payments that gradually increase. 5 specific strategies are readily available: three plans that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 other plans 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 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 locations, the ceiling is $726,525, up from $679,650 a year earlier. These limitations are referred to as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict quantities each year in reaction to altering house prices.

FHA is needed by law to change its amounts based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard home mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits differ according to the cost of living in a specific location, and can be different from one county to the next. Areas with a higher cost of living will have greater limitations, and vice versa. Unique exceptions are produced real estate 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 actually suffered a major monetary hardship 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 adjustment that would reduce the rate of interest, extend the repayment duration, or postpone 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 Prunedale CA?

The FHA makes it relatively simple to qualify for a loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve 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 Prunedale CA, you might have better luck with shopping around for a better option.

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 Prunedale 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 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 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

Customers get their mortgage from FHA-approved lending institutions in Prunedale instead of the FHA itself, which only guarantees the loans. FHA-approved lenders can have various rates and costs, even for the very same loan.

FHA loans are available through numerous sources– from the greatest banks and cooperative credit union to neighborhood banks and independent mortgage lending institutions. Costs, services and underwriting requirements differ among lenders or home loan brokers, so it’s crucial to look around.

Find out more about how to find low FHA mortgage loan provider.


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