How To Qualify For FHA Loan in San Mateo California (San Mateo County)
Looking for an FHA Loan in San Mateo 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). Popular with first-time home-buyers, FHA loans require more flexible minimum credit scores and down payments than many conventional 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 significant to remember though, that the lower the credit rating, 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 rise of foreclosures and defaults that happened in 1930s; to provide mortgage companies with sufficient insurance; and to help spark the housing market by making home loans more accessible and attainable for home-buyers with less than perfect credit or a low down payment due to FHA mortgage limits in San Mateo, California. Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their home loan 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 Mateo 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 qualified 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 is that it’s an assumable home loan which means if you want to sell your home, 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 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 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 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 adjustment. This insures that the payment adjustment will be very little even on a worst case rate change.
About San Mateo California
The Ramaytush people lived in the land, prior to it becoming the city of San Mateo. In 1789, the Spanish missionaries had named a Native American village along Laurel Creek as Los Laureles or the Laurels (Mission Dolores, 1789). At the time of Mexican Independence, 30 native Californians were at San Mateo, most likely from the Salson tribelet.
Captain Frederick William Beechey in 1827 traveling with the hills on their right, known in that part as the Sierra del Sur, began to approach the road, which passing over a small eminence, opened out upon “a wide country of meadow land, with clusters of fine oak free from underwood… It strongly resembled a nobleman’s park: herds of cattle and horses were grazing upon the rich pasture, and numerous fallow‑deer, startled at the approach of strangers, bounded off to seek protection among the hills… This spot is named San Matheo, and belongs to the mission of San Francisco.”
Starting in 1856, the city of San Mateo was documented by Spanish colonists as part of the Rancho de las Pulgas (literally “Ranch of the Fleas”) and the Rancho San Mateo, the earliest history is held in the archives of Mission Dolores.
Around the 1850s, some San Franciscans began building summer homes in the mid-Peninsula, because of the milder climate. While most of this early settlement occurred in adjacent Hillsborough and Burlingame, a number of historically important mansions and buildings were constructed in San Mateo.
A.P. Giannini, founder of the Bank of Italy (which later became the Bank of America), lived here most of his life. His mansion, Seven Oaks, is listed in the National Register of Historic Places (No. 99001181). Located at 20 El Cerrito Avenue, it has been deteriorating as it has not been preserved or occupied for years.
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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 property. 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 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!)
Kinds Of FHA Home Loans
In addition to its popular FHA loan, the FHA likewise insures other loan programs offered by private loan providers. Here’s a take a look at each of them.
- FHA 203( k) loans – These FHA loans assist homebuyers purchase a house– and refurbish it– all with a single mortgage. Property owners can likewise use the program to re-finance their current home mortgage and include the cost of remodeling tasks into the brand-new loan. FHA 203( k) loans come in 2 types:
- The restricted 203( k) has an easier application process, and the repair work or improvements should total $35,000 or less.
- The basic 203( k) needs extra documentation and applies to enhancements costing more than $5,000, but the total worth of the residential or commercial property must still fall within the FHA mortgage limitation for the location.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular kind 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 offered for withdrawal differs by debtor and depends on the age of the youngest borrower or eligible non-borrowing spouse, existing rates of interest and the lesser of the house’s evaluated worth or the HECM FHA mortgage limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA allow property buyers to purchase houses that are currently energy effective, such as EnergyStar-certified buildings. Or they can be utilized to buy and redesign older houses with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a bigger deposit.
- FHA Section 245( a) loan – Also called the Graduated Payment Mortgage, this program is tailored at customers whose incomes will increase in time. You start out with smaller sized month-to-month payments that slowly go up. Five specific strategies are offered: 3 plans that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. Two other plans 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 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 limits are described as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict amounts each year in action to altering house costs.
FHA is required by law to adjust its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for conventional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations differ according to the cost of living in a specific area, and can be various from one county to the next. Locations 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 home building is more costly.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have suffered a serious 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 decrease the rate of interest, extend the repayment period, 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 San Mateo CA?
The FHA makes it relatively simple to qualify for a home loan. Again, the government guarantees the loan, so lenders are more willing to approve loans. 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 Mateo CA, you might have better luck with another.
Note: you never know until you submit an app. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in San Mateo 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 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 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 attests 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 loan providers in San Mateo rather than the FHA itself, which just guarantees the loans. FHA-approved loan providers can have various 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 home loan lenders. Costs, services and underwriting standards differ among lending institutions or home loan brokers, so it’s important to shop around.
Find out more about how to discover low FHA home loan lender.