How To Qualify For FHA Loan in Surfside California (Orange County)
Looking for an FHA Loan in Surfside California?
FHA loans have been a flexible mortgage 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 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 qualifications.
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 grow the housing market by making home loans more accessible and affordable for people with not so great credit or a low down payment due to FHA mortgage limits in Surfside, 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 mortgage payments.
Because of that insurance, mortgage companies can, and do, offer FHA home loans at really attractive 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 Surfside 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 loan.
Consumers 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 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 Orange 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 home 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 changes annually after the initial fixed time frame. The 3/1 and 5/1 FHA Hybrid products allow 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 Surfside California
Surfside Colony was begun in 1929 as an oceanside resort community. It was incorporated with the state of California in 1930. There were originally plans to develop both sides of Pacific Coast Highway (with D and E rows of houses on the east side), but these plans never materialized. A tunnel, which still exists though it is inaccessible, was built under Pacific Coast Highway to facilitate easy transit back and forth.
During World War II, the U.S. Navy developed the area to the north of Surfside as an ammunition depot. A large jetty and channel were built to allow ships to dock. This development altered Surfside and its beachfront significantly. Changes in wave patterns and resulting erosion have continued to plague the community since then. Every few years, the U.S. Army Corps of Engineers must work to replenish and rebuild the beach, dredging and refilling with millions of cubic yards of sand.
On July 4, 2008, a small plane pulling an advertising banner lost power and was forced to land in the water just off the shore of Surfside. The pilot suffered only minor injuries, and no one in the water was injured.
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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 Orange 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 guarantees other loan programs provided by private lenders. Here’s a take 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 mortgage. Property owners can likewise use the program to re-finance their existing mortgage and add the cost of remodeling jobs into the new loan. FHA 203( k) loans can be found in 2 types:
- The limited 203( k) has a much easier application process, and the repair work or improvements must amount to $35,000 or less.
- The basic 203( k) requires additional paperwork and applies to enhancements costing more than $5,000, but the total worth of the home should still fall within the FHA home mortgage limitation for the area.
- 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 homeowners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a portion of their house’s equity. The amount that will be available for withdrawal varies by customer and depends upon the age of the youngest customer or eligible non-borrowing spouse, existing rate of interest and the lesser of the house’s assessed value or the HECM FHA home mortgage limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA permit homebuyers to purchase houses that are currently energy effective, such as EnergyStar-certified buildings. Or they can be used to purchase and remodel older houses 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 referred to as the Graduated Payment Mortgage, this program is geared at debtors whose earnings will increase in time. You begin with smaller sized month-to-month payments that slowly go up. 5 specific strategies are readily available: 3 strategies that allow 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 every year.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2022
For 2019, the flooring limitation 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 ago. These limits are described as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit amounts each year in reaction to changing house costs.
FHA is needed by law to change its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard 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 greater cost of living will have greater limitations, and vice versa. Special exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house construction is more costly.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have suffered a major monetary difficulty 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 decrease the rate of interest, extend the payback 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 Surfside CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so lenders 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 Surfside CA, you might have better luck with looking around for another.
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 Surfside to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage 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 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 demonstrates good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
How to Find FHA Lenders
Customers get their mortgage from FHA-approved loan providers in Surfside instead of the FHA itself, which just guarantees the loans. FHA-approved loan providers can have different rates and expenses, even for the exact same loan.
FHA loans are offered through lots of sources– from the biggest banks and credit unions to neighborhood banks and independent home mortgage lenders. Expenses, services and underwriting requirements vary amongst lending institutions or mortgage brokers, so it’s essential to shop around.
Discover more about how to find low FHA home mortgage loan provider.