How To Qualify For FHA Loan in San Miguel California (San Luis Obispo County)
Looking for an FHA Loan in San Miguel California?
FHA loans have been a flexible home loan 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 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 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 home loans more accessible and affordable for people with less than stellar credit or a low down payment due to FHA mortgage limits in San Miguel, 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 home loan payments.
Because of that insurance, lenders can, and do, offer FHA mortgages at beneficial mortgage 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 Miguel 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.
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 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 Luis Obispo 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 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 readjusts 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 minimal even on a worst case rate change.
About San Miguel California
The area of San Miguel and the rest of the southern Salinas Valley was inhabited by the Salinans, an Indigenous Californian nation.
The Spanish founded the settlement at San Miguel on 25 July 1797, when Fermín de Lasuén established Mission San Miguel Arcángel, under the authority of the Franciscan Order. The site of the mission was specifically chosen due to its proximity to the large number of Salinan villages in the area. The interior of the mission church features murals executed under the direction of the famed artist Esteban Munrás in the 1820s.
The mission’s location between Mission San Luis Obispo and Mission San Antonio de Padua provided a stop on the trip that had previously taken two days. In 1803, the mission reported an Indian population of 908, while its lands grazed 809 cattle, 3,223 sheep, 342 horses and 29 mules. That year’s harvest included about 2,186 fanegas of wheat and corn (A fanega was about 220 pounds or 100 kilograms). Most of the mission burned, while still being developed, in 1806. It was rebuilt within a year.
The Rios-Caledonia Adobe was built in 1835 just south of Mission San Miguel as a home for the overseer of mission lands.
On July 15, 1836, following the Mexican secularization of the missions, Mission San Miguel Arcángel was acquired by Ygnacio Coronel, a noted Californio ranchero and politician.
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 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 Luis Obispo 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 Mortgage Loans
In addition to its popular FHA loan, the FHA also insures other loan programs offered by personal lenders. 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 loan. Homeowners can also use the program to re-finance their current mortgage and add the expense of remodeling tasks into the new loan. FHA 203( k) loans been available in two types:
- The limited 203( k) has a simpler application process, and the repair work or improvements must total $35,000 or less.
- The basic 203( k) needs additional paperwork and applies to enhancements costing more than $5,000, however the total value of the home need to still fall within the FHA mortgage limit for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise guaranteed by the FHA. A HECM permits older property owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a portion of their house’s equity. The quantity that will be readily available for withdrawal differs by debtor and depends on the age of the youngest debtor or qualified non-borrowing partner, existing rates of interest and the lesser of the home’s appraised worth or the HECM FHA home loan limit or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective mortgages backed by the FHA permit property buyers to buy homes that are already energy effective, such as EnergyStar-certified buildings. Or they can be used to buy and remodel older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a bigger down payment.
- 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 plans are available: 3 plans that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. Two other strategies set payment increases 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 flooring limit for FHA loans in most of the country 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 described as “ceilings” and “floors” that FHA will insure. FHA updates restrict amounts each year in action to altering house costs.
FHA is needed by law to adjust its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages ensured 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 cost of living will have greater limitations, and vice versa. Unique 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 provide some versatility on FHA loan requirements to those who have actually suffered a serious 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 modification that would lower the interest rate, extend the repayment 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 Miguel CA?
The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so lenders are more willing to approve mortgage loans. However, mortgage lenders can (and do) set standards that can be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near San Miguel CA, you might have better luck with shopping around for a better option.
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 Miguel 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 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 lenders in San Miguel instead of the FHA itself, which only insures the loans. FHA-approved loan providers can have different rates and expenses, even for the very same loan.
FHA loans are offered through numerous sources– from the greatest banks and cooperative credit union to neighborhood banks and independent mortgage lending institutions. Expenses, services and underwriting standards vary amongst loan providers or home loan brokers, so it’s important to look around.
Learn more about how to find low FHA home loan lender.