How To Qualify For FHA Loan in Shasta California (Shasta County)
Looking for an FHA Loan in Shasta California?
An FHA loan is a home loan that’s 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 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 score can be between 500 – 579 if a 10% down payment is made. It’s crucial to remember though, that the lower the credit rating, 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 qualifications.
The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help grow the housing market by making mortgages highly accessible and affordable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Shasta, 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, mortgage companies 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.
(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 Shasta 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 home 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 circumstances.
Another advantage of an FHA mortgage loan is that it’s an assumable 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 Shasta 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 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 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 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 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 modification. This insures that the payment adjustment will be minimal even on a worst case rate change.
About Shasta California
A bustling town of the 1850s through the 1880s, Shasta was for its time, the largest settlement in Shasta County and the surrounding area. Sometimes referred to today as “Old Shasta”, the town was an important commercial center and a major shipping point for mule trains and stagecoaches serving the mining towns and later settlements of northern California. The discovery of gold near Shasta in 1848 brought California Gold Rush-era Forty-Niners up the Siskiyou Trail in search of riches – most passed through Shasta, and continued to use it as base of operations. Those that stayed worked the placer gold diggings of nearby, short-lived camps like Horsetown, Buckeye, and Whiskeytown, California.
Situated about six miles (10 km) west of Redding, California along Highway 299, Shasta was once home to some 3,500 residents, the county seat, and a thriving commercial district. However, in 1873, the under construction Oregon-bound branch of the Central Pacific Railroad bypassed Shasta, in favor of Redding and the town began its decline into near “ghost town” status. In 1888, Shasta lost the county seat to Redding. By the twentieth century, and after several fires, a distinctive row of gold rush era buildings remained along its Main Street, which attracted preservationists and their efforts to save all the local stories and landscape, and the remaining first generation of 1850s brick and iron door architecture.
The poet Joaquin Miller refers to Shasta in his 1870s novel, Life Amongst the Modocs, based on the experiences of Miller as a young man living in the area in the 1850s. In this book, Miller describes his brief imprisonment in a Shasta jail for horse-stealing and subsequent escape with the aid of his Native American wife.
According to the United States Census Bureau, the CDP covers an area of 11.0 square miles (28.4 km), 99.96% of it land and 0.04% of it water.
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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 yearly 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 Shasta 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 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 assist homebuyers purchase a home– and refurbish it– all with a single mortgage. House owners can also utilize the program to refinance their current mortgage and add the expense of redesigning tasks into the brand-new loan. FHA 203( k) loans come in 2 types:
- The minimal 203( k) has an easier application process, and the repairs or improvements need to total $35,000 or less.
- The basic 203( k) needs extra documentation and applies to enhancements costing more than $5,000, however the overall value of the home need to still fall within the FHA home loan limitation for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is likewise guaranteed by the FHA. A HECM allows older property owners (aged 62 and up) with substantial equity or those who own their homes outright to withdraw a part of their home’s equity. The amount that will be offered for withdrawal varies by debtor and depends on the age of the youngest debtor or eligible non-borrowing spouse, existing rate of interest and the lesser of the house’s assessed worth or the HECM FHA home loan limit or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow property buyers to buy houses that are currently energy effective, such as EnergyStar-certified buildings. Or they can be utilized to purchase and renovate older homes with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger down payment.
- FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is geared at debtors whose earnings will increase in time. You start with smaller sized regular monthly payments that slowly go up. Five particular strategies are available: three strategies that allow five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 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 limit for FHA loans in the majority 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 earlier. These limitations are referred to as “ceilings” and “floorings” that FHA will insure. FHA updates restrict quantities each year in action to changing house costs.
FHA is needed by law to adjust its quantities 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 limits vary 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 greater limitations, and vice versa. Special exceptions are produced housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building and construction is more pricey.
FHA Loan Relief
Loan servicers can use some flexibility on FHA loan requirements to those who have actually suffered a severe financial challenge or are having a hard time to make their payments.
That relief might be in the form of a temporary duration of forbearance, a loan adjustment that would lower the rates of interest, 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 Shasta CA?
The FHA makes it relatively easy to qualify for a mortgage. Again, the government guarantees the loan, so lenders are more willing to approve mortgages. 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 Shasta 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 Shasta 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 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 shows good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Customers get their home loans from FHA-approved lending institutions in Shasta instead of the FHA itself, which only guarantees the loans. FHA-approved loan providers can have various rates and expenses, even for the exact same loan.
FHA loans are available through numerous sources– from the most significant banks and cooperative credit union to neighborhood banks and independent mortgage lending institutions. Costs, services and underwriting requirements vary amongst loan providers or home loan brokers, so it’s important to search.
Learn more about how to discover low FHA mortgage lending institution.