How To Qualify For FHA Loan in San Lorenzo California (Alameda County)
Looking for an FHA Loan in San Lorenzo 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). Popular with first-time home-buyers, FHA mortgages require lower 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 important 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 qualifications.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide lending companies with sufficient insurance; and to help grow the housing market by making mortgages highly accessible and affordable for people with not so great credit or a low down payment due to FHA mortgage limits in San Lorenzo, 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, lenders can, and do, offer FHA mortgages at really attractive 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.
(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 Lorenzo 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.
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 scenario.
Another advantage of an FHA home loan is that it’s an assumable mortgage 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 Alameda 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 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 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 readjusts 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 adjustment. This insures that the payment adjustment will be minimal even on a worst case rate change.
About San Lorenzo California
San Lorenzo is located on the route of El Camino Viejo on land of the former Rancho San Lorenzo, a Mexican land grant given to Guillermo Castro in 1841, and the former Rancho San Leandro, granted to José Joaquin Estudillo in 1842.
Early residents during the California Gold Rush era lived here as squatters along the border between Rancho San Lorenzo and Rancho San Leandro. The informal name given to the area was Squatterville.
The first post office opened in San Lorenzo in 1854.
Many of the early inhabitants are buried in San Lorenzo Pioneer Cemetery, including Moses Wicks, who brought oysters to San Leandro Bay from Patchogue, Long Island. The cemetery is maintained by the county and the Hayward Area Historical Society.
San Lorenzo was mostly farmland, a significant center of production of fruit and flowers, from the mid-19th century to the mid-20th century.
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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 Alameda 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 likewise insures other loan programs used by private lending institutions. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help property buyers acquire a home– and refurbish it– all with a single mortgage. House owners can also use the program to re-finance their current mortgage and include the cost of renovating tasks into the brand-new loan. FHA 203( k) loans been available in 2 types:
- The restricted 203( k) has an easier application procedure, and the repair work or improvements need to total $35,000 or less.
- The standard 203( k) requires extra documents and applies to improvements costing more than $5,000, however the overall worth of the home must still fall within the FHA mortgage limit for the location.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home mortgage and is likewise insured by the FHA. A HECM enables older house owners (aged 62 and up) with substantial equity or those who own their homes outright to withdraw a part of their house’s equity. The quantity that will be available for withdrawal varies by borrower and depends on the age of the youngest debtor or eligible non-borrowing spouse, current interest rates and the lower of the house’s appraised worth or the HECM FHA home loan limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient mortgages backed by the FHA allow homebuyers to acquire houses that are currently energy effective, such as EnergyStar-certified structures. Or they can be used to purchase and renovate 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 known as the Graduated Payment Mortgage, this program is geared at borrowers whose earnings will increase with time. You start with smaller sized month-to-month payments that gradually increase. Five specific plans are offered: 3 strategies that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. Two other strategies set payment increases over 10 years at 2 percent and 3 percent annually.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the floor limit 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 back. These limits are referred to as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit amounts each year in action to altering home costs.
FHA is needed by law to adjust its amounts based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for conventional 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 location, and can be various from one county to the next. Locations with a higher cost 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 construction is more costly.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have actually suffered a major monetary difficulty or are struggling to make their payments.
That relief might be in the form of a short-term 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 San Lorenzo CA?
The FHA makes it relatively easy to qualify for a loan. Again, the government guarantees the loan, so lending companies are more willing to approve mortgages. However, mortgage lenders can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near San Lorenzo 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 San Lorenzo to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the home 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 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 demonstrates 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 mortgage from FHA-approved loan providers in San Lorenzo instead of the FHA itself, which just insures the loans. FHA-approved lenders can have different rates and costs, even for the same loan.
FHA loans are available through many sources– from the greatest banks and cooperative credit union to community banks and independent mortgage lenders. Expenses, services and underwriting standards differ among loan providers or home mortgage brokers, so it’s important to shop around.
Find out more about how to find low FHA mortgage lending institution.