How To Qualify For FHA Loan in San Fernando California (Los Angeles County)
Looking for an FHA Loan in San Fernando 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). 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 worthiness, the higher the interest borrowers will receive. 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 companies with adequate insurance; and to help grow the housing market by making home loans much more accessible and attainable for consumers with not so great credit or a low down payment due to FHA mortgage limits in San Fernando, 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 home loan payments.
Because of that insurance, mortgage companies 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 San Fernando 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 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 mortgage 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 Los Angeles 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 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 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 changes annually after the initial fixed period. 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 San Fernando California
The city was named for the nearby Mission San Fernando Rey de España (which in turn was named after St. Ferdinand), and was part of the Mexican land grant of Rancho Ex-Mission San Fernando. In 1874 Charles Maclay, San Fernando founder, bought 56,000 acres (227 km) of the Rancho. In 1882, cousins George K. Porter and Benjamin F. Porter of future Porter Ranch each received one-third of the total land. In 1885, Maclay founded the Maclay School of Theology, a Methodist seminary in his newly founded town of San Fernando. After his death it became an affiliate and moved to the campus of the University of Southern California and then the Claremont School of Theology.
While most of the towns in the surrounding San Fernando Valley agreed to annexation by Los Angeles in the 1910s, eager to tap the bountiful water supply provided by the newly opened Los Angeles Aqueduct, San Fernando’s abundant groundwater supplies allowed it to remain a separate city. In the first half of the 20th century after incorporation in 1911, the city of San Fernando has tried to annex their city limits to Sylmar, Mission Hills and Pacoima, but the city of Los Angeles has kept up their rapid annexation and caused many failed attempts; and by the 1950s, the city said that annexation was hard to do, due to the large bureaucracy of Los Angeles. As the San Fernando Valley has transitioned from an agricultural area to a suburban one in the decades after World War II, San Fernando retained its independence.
As with much of the San Fernando Valley east of the San Diego Freeway, the city of San Fernando has seen a significant demographic shift in recent years. Declining birth-rates and an aging population of middle-class whites, who once dominated the area in the 1950s, has contributed to the movement into other parts of the San Fernando Valley. There has also been movement into the Santa Clarita and Antelope Valleys to the north. Latinos became the majority population (the largest percentage in the Greater Los Angeles area at 90 percent as of 2015).
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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 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 Los Angeles 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 Home Loans
In addition to its popular FHA loan, the FHA likewise 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 homebuyers acquire a house– and renovate it– all with a single home mortgage. House owners can likewise utilize the program to re-finance their current home mortgage and add the cost of remodeling jobs into the brand-new loan. FHA 203( k) loans been available in 2 types:
- The restricted 203( k) has a simpler application procedure, and the repairs or enhancements must amount to $35,000 or less.
- The basic 203( k) needs additional documents and applies to improvements costing more than $5,000, but the overall worth of the property should still fall within the FHA home mortgage limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse home loan and is also guaranteed by the FHA. A HECM permits older house owners (aged 62 and up) with substantial equity or those who own their homes outright to withdraw a portion of their home’s equity. The amount that will be available for withdrawal varies by customer and depends upon the age of the youngest borrower or qualified non-borrowing partner, existing rate of interest and the lesser of the house’s evaluated worth or the HECM FHA home mortgage limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA allow homebuyers to buy 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 larger deposit.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is geared at debtors whose incomes will increase gradually. You begin with smaller month-to-month payments that gradually go up. Five specific plans are available: 3 plans that allow five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. Two other plans set payment boosts over 10 years at 2 percent and 3 percent yearly.
(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 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 action to changing home costs.
FHA is needed by law to adjust its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for traditional home mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations differ according to the cost of living in a particular area, and can be different from one county to the next. Areas with a greater cost of living will have higher limitations, and vice versa. Special exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home 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 financial hardship or are struggling 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 interest rate, extend the payback 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 San Fernando CA?
The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so lending companies are more willing to approve loans. However, lending companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near San Fernando CA, you might have better luck with 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 Fernando 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 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 mortgage.
How to Find FHA Lenders
Debtors get their home mortgage from FHA-approved lending institutions in San Fernando rather than the FHA itself, which only insures the loans. FHA-approved lenders can have different rates and costs, even for the same loan.
FHA loans are available through numerous sources– from the biggest banks and credit unions to community banks and independent home loan lenders. Costs, services and underwriting standards vary among lending institutions or mortgage brokers, so it’s crucial to shop around.
Learn more about how to discover low FHA home loan lender.