How To Qualify For FHA Loan in Templeton California (San Luis Obispo County)
Looking for an FHA Loan in Templeton California?
An FHA loan is a home loan 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 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 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 grow the housing market by making mortgages much more accessible and attainable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Templeton, 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, lenders can, and do, offer FHA home loans at beneficial 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 Templeton 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 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 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 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 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 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 procedure.
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 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 modification. This insures that the payment adjustment will be minimal even on a worst case rate change.
About Templeton California
Templeton is located within the former Rancho Paso de Robles Mexican land grant and was founded in 1886 when Chauney Hatch Phillips of the West Coast Land Company sent R.R. Harris to survey 160 acres (0.65 km) set aside for a town to exist south of Paso Robles as part of the companies larger purchase of 63,000 acres (250 km2). This 160 acres (0.65 km) was to be laid out in business and residential lots with 5–12 acre parcels, with the town to be named “Crocker” after a Vice President of the Southern Pacific Railroad, Charles F. Crocker; however, Crocker instead chose to name the town “Templeton,” after his two-year-old son, Charles Templeton Crocker.
The town was briefly the end of the line for passengers travelling south via the Southern Pacific Railroad from northern California; passengers disembarked at Templeton and were then carried by stagecoach south to San Luis Obispo. In 1889, the railroad was continued 14 miles (23 km) south to Santa Margarita and the town was reclassified to a flag stop. Currently, the railroad stops in nearby Paso Robles before continuing on, and Templeton is classified as a bypass.
In 1898, a fire destroyed most of the original wooden buildings of the business district along Main Street, prompting this section of the town to be rebuilt with brick, although on a somewhat smaller scale than before.
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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 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!)
Types 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 take a look at each of them.
- FHA 203( k) loans – These FHA loans assist property buyers acquire a house– and refurbish it– all with a single home loan. Homeowners can likewise utilize the program to refinance their existing home loan and include the expense of redesigning jobs into the brand-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 need to amount to $35,000 or less.
- The basic 203( k) needs additional paperwork and applies to enhancements costing more than $5,000, but the total value of the home need to still fall within the FHA home mortgage limit for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is also guaranteed by the FHA. A HECM enables older property owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a part of their home’s equity. The amount that will be readily available for withdrawal differs by borrower and depends upon the age of the youngest debtor or qualified non-borrowing spouse, existing interest rates and the lower of the house’s assessed worth or the HECM FHA home loan limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA allow homebuyers to buy houses that are already energy efficient, such as EnergyStar-certified structures. Or they can be utilized to purchase and renovate older houses 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 known as the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase with time. You begin with smaller sized monthly payments that slowly increase. Five specific plans are offered: three strategies that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 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 limit 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 limitations are described as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict amounts each year in reaction to changing home prices.
FHA is required by law to adjust its amounts based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits differ according to the cost of living in a certain area, and can be different from one county to the next. Areas with a greater expense of living will have greater limitations, and vice versa. Special exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house construction is more pricey.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have actually 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 period of forbearance, a loan modification that would decrease the rate of interest, extend the payback 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 Templeton CA?
The FHA makes it relatively easy to qualify for a home loan. Again, the government guarantees the loan, so lenders are more willing to approve loans. However, mortgage companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Templeton CA, you might have better luck with looking around for 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 Templeton 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 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 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
Customers get their home mortgage from FHA-approved lending institutions in Templeton rather than the FHA itself, which just guarantees the loans. FHA-approved loan providers can have different rates and costs, even for the very same loan.
FHA loans are available through many sources– from the most significant banks and cooperative credit union to neighborhood banks and independent home mortgage loan providers. Expenses, services and underwriting standards differ amongst loan providers or mortgage brokers, so it’s crucial to search.
Learn more about how to find low FHA mortgage lending institution.
