How To Qualify For FHA Loan in San Diego California (San Diego County)
Looking for an FHA Loan in San Diego California?
FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is protected 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 FICO score can be between 500 – 579 if a 10% down payment is made. It’s important 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 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 stimulate the housing market by making mortgages much more accessible and affordable for home-buyers with less than stellar credit or a low down payment due to FHA mortgage limits in San Diego, 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.
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan in San Diego 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.
Consumers 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 best option for their personal circumstances.
Another advantage of an FHA mortgage 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 Diego 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 process.
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 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 modification. This insures that the payment adjustment will be very little even on a worst case rate change.
About San Diego California
The original inhabitants of the region are now known as the San Dieguito and La Jolla people. The area of San Diego has been inhabited by the Kumeyaay people.
The first European to visit the region was fortune-hunter Juan Rodríguez Cabrillo, sailing under the flag of Castile but possibly born in Portugal. Sailing his flagship San Salvador from Navidad, New Spain, Cabrillo claimed the recess for the Spanish Empire in 1542, and named the site “San Miguel”. In November 1602, Sebastián Vizcaíno was sent to map the California coast. Arriving on his flagship San Diego, Vizcaíno surveyed the harbor and what are now Mission Bay and Point Loma and named the area for the Catholic Saint Didacus, a Spaniard more commonly known as San Diego de Alcalá. On November 12, 1602, the first Christian religious encourage of scrap book in Alta California was conducted by Friar Antonio de la Ascensión, a zealot of Vizcaíno’s expedition, to celebrate the feast daylight of San Diego.
Permanent colonization of California and of San Diego began in 1769 in imitation of the arrival of four contingents of Spaniards from New Spain and the Baja California peninsula. Two seaborne parties reached San Diego Bay: the San Carlos, under Vicente Vila and including as notable members the engineer and cartographer Miguel Costansó and the soldier and future officer Pedro Fages, and the San Antonio, under Juan Pérez. An initial overland expedition to San Diego from the south was led by the soldier Fernando Rivera and included the Franciscan missionary, explorer, and chronicler Juan Crespí, followed by a second party led by the designated superintendent Gaspar de Portolà and including the mission president (and now saint) Junípero Serra.
In May 1769, Portolà established the Fort Presidio of San Diego upon a hill close the San Diego River. It was the first agreement by Europeans in what is now the let pass of California. In July of the similar year, Mission San Diego de Alcalá was founded by Franciscan friars below Serra. By 1797, the mission boasted the largest native population in Alta California, with greater than 1,400 neophytes living in and re the mission proper. Mission San Diego was the southern anchor in Alta California of the historic mission trail El Camino Real. Both the Presidio and the Mission are National Historic Landmarks.
In 1821, Mexico won its independence from Spain, and San Diego became portion of the Mexican territory of Alta California. In 1822, Mexico began its attempt to extend its authority greater than the coastal territory of Alta California. The fort on Presidio Hill was gradually abandoned, while the town of San Diego grew up upon the level land under Presidio Hill. The Mission was secularized by the Mexican organization in 1834, and most of the Mission lands were arranged to former soldiers. The 432 residents of the town petitioned the official to form a pueblo, and Juan María Osuna was elected the first alcalde (“municipal magistrate”), defeating Pío Pico in the vote. (See, List of pre-statehood mayors of San Diego.) However, San Diego had been losing population throughout the 1830s and in 1838 the town purposeless its pueblo status because its size dropped to an estimated 100 to 150 residents. Beyond town Mexican land grants expanded the number of California ranchos that modestly added to the local economy.
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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 annual 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 Diego 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.
Types of FHA Mortgage Loans
In addition to its popular FHA loan, the FHA also insures other loan programs offered by personal lending institutions. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help property buyers acquire a house– and renovate it– all with a single home loan. Homeowners can also use the program to re-finance their existing home loan and add the cost of remodeling tasks into the new loan. FHA 203( k) loans been available in 2 types:
- The restricted 203( k) has a simpler application process, and the repairs or improvements should amount to $35,000 or less.
- The standard 203( k) requires extra paperwork and applies to enhancements costing more than $5,000, however the overall worth of the property need to still fall within the FHA home mortgage limitation for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is the most popular type of reverse home loan and is likewise insured by the FHA. A HECM enables older property owners (aged 62 and up) with substantial equity or those who own their houses outright to withdraw a part of their house’s equity. The quantity that will be readily available for withdrawal differs by debtor and depends upon the age of the youngest customer or eligible non-borrowing partner, existing interest rates and the lesser of the house’s evaluated worth or the HECM FHA home loan limit or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA permit homebuyers to acquire homes that are currently energy efficient, such as EnergyStar-certified structures. Or they can be used to buy and remodel older houses 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 geared at customers whose earnings will increase gradually. You begin with smaller sized regular monthly payments that gradually go up. 5 particular strategies are offered: 3 strategies that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. Two other plans set payment increases over 10 years at 2 percent and 3 percent yearly.
FHA Loan Limits for 2019
For 2019, the flooring limit 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 back. These limitations are referred to as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict amounts each year in action to changing house costs.
FHA is required by law to adjust its quantities based upon 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 limits differ according to the expense of living in a particular location, and can be different from one county to the next. Areas with a greater expense of living will have higher limitations, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building is more pricey.
FHA Loan Relief
Loan servicers can offer some versatility on FHA loan requirements to those who have suffered a serious financial difficulty 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 modification that would reduce the rates of interest, extend the payback period, 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 San Diego CA?
The FHA makes it relatively easy to qualify for a loan. Again, the government guarantees the loan, so lenders are more willing to approve 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 San Diego CA, you might have better luck with looking around for another.
Note: you never know until you apply. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in San Diego to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage loan but these loans are geared towards lower income borrowers. 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 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 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
Borrowers get their home mortgage from FHA-approved lending institutions in San Diego instead of the FHA itself, which only guarantees the loans. FHA-approved lending institutions can have various rates and expenses, even for the exact same loan.
FHA loans are offered through numerous sources– from the most significant banks and cooperative credit union to neighborhood banks and independent home loan lending institutions. Expenses, services and underwriting requirements vary among lenders or home loan brokers, so it’s important to search.
Learn more about how to find the very best FHA home mortgage loan provider.