How To Qualify For FHA Loan in Temple City California (Los Angeles County)
Looking for an FHA Loan in Temple City California?
An FHA loan is a mortgage that’s 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 FICO 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 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 lenders with adequate insurance; and to help spark the housing market by making mortgages highly accessible and attainable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Temple City, 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 lenders 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 Temple City 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.
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 circumstances.
Another advantage of an FHA 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 Los Angeles 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 enable 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 modification. This insures that the payment adjustment will be very little even on a worst case rate change.
About Temple City California
The town of Temple originated on May 30, 1923, when Walter P. Temple (June 7, 1870 – November 13, 1938) purchased 400 acres (160 ha) of land four miles (6 km) east of San Gabriel which had been part of Lucky Baldwin’s Rancho Santa Anita. The original townsite (Tract 6561, recorded with the LA County Tax Assessor in June 1923) corresponds to the present-day area bounded by Garibaldi Avenue on the north, Baldwin Avenue on the east, Live Oak Avenue on the south, and Encinita Avenue on the west.
Temple, the son and tenth child of Pliny Fisk Temple and William Workman’s daughter Antonia Margarita Workman, was born on Rancho La Merced, which is today part of the city of Montebello. This was the site of the original San Gabriel Mission, founded by the Franciscan Fathers next to the rich bottom lands of the San Gabriel River. Historically called “Rio de los Temblores”, which means the River of the Earthquakes, it is today known as the Rio Hondo River.
Temple envisioned building a community where average people could afford to live and own their homes. He then divided the area into lots and laid out the park facing Las Tunas Drive. He named other streets after friends and family: Workman, Kauffman, Rowland, Temple and Agnes. Bond issues initiated by Temple were responsible for street paving and electricity. Temple also petitioned the Pacific Electric Railway Company to extend its Los Angeles to Alhambra line to a depot adjacent to Temple City Park. The extension of the railway contributed to the steady growth of Temple City, and is commemorated by statues of railcar passengers along Rosemead Boulevard.
In 1925, the Women’s Club of Temple City was founded.
The town was originally named “City of Temple” after its founder, Walter Temple, but the United States Postmaster General Harry Stewart New demanded a name change in 1926 because the mail was accidentally being directed to the Phoenix suburb of Tempe. It was officially designated “Temple City” but remained a city in name only until after the post–World War II population explosion followed by incorporation on May 25, 1960, which resulted in the redundant name: “City of Temple City”. (This redundancy is shared with other cities in California, such as the City of California City.) Merrill Fitzjohn, the founder and original owner of Fitzjohn Jewelers on Las Tunas Drive, was appointed as the city’s first mayor.
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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 house. 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 Los Angeles 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 Mortgage Loans
In addition to its popular FHA loan, the FHA also insures other loan programs provided by private lenders. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans assist property buyers acquire a home– and renovate it– all with a single home mortgage. Homeowners can also utilize the program to re-finance their current home loan and add the cost of remodeling projects into the new loan. FHA 203( k) loans can be found in two types:
- The minimal 203( k) has a much easier application process, and the repairs or improvements need to amount to $35,000 or less.
- The standard 203( k) needs additional paperwork and applies to improvements costing more than $5,000, but the overall value of the property 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 insured by the FHA. A HECM permits older homeowners (aged 62 and up) with substantial equity or those who own their houses outright to withdraw a part of their home’s equity. The quantity that will be available for withdrawal varies by borrower and depends on the age of the youngest customer or qualified non-borrowing spouse, current rate of interest and the lower of the home’s appraised value or the HECM FHA home mortgage limitation or prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient mortgages backed by the FHA allow homebuyers to purchase houses that are currently energy efficient, such as EnergyStar-certified structures. Or they can be utilized to buy and redesign older homes with energy-efficient, or “green,” updates and roll the expenses 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 debtors whose earnings will increase with time. You start out with smaller sized monthly payments that gradually go up. Five particular strategies are readily available: 3 plans that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent annually. 2 other strategies set payment boosts over 10 years at 2 percent and 3 percent each year.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2022
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 back. These limits are referred to as “ceilings” and “floors” that FHA will insure. FHA updates limit quantities each year in action to changing home 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 standard home mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations vary according to the expense of living in a particular location, and can be various from one county to the next. Areas with a higher cost of living will have higher limits, and vice versa. Special exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more expensive.
FHA Loan Relief
Loan servicers can provide some flexibility on FHA loan requirements to those who have suffered a serious financial challenge 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 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 Temple City 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 Temple City CA, you might have better luck with choosing 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 Temple City 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 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 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 demonstrates good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Debtors get their home loans from FHA-approved loan providers in Temple City rather than the FHA itself, which just insures the loans. FHA-approved lending institutions can have different rates and costs, even for the very same loan.
FHA loans are offered through lots of sources– from the biggest banks and credit unions to community banks and independent mortgage lenders. Costs, services and underwriting requirements differ amongst lenders or mortgage brokers, so it’s important to shop around.
Find out more about how to discover low FHA mortgage lender.