How To Qualify For FHA Loan in Torrance California (Los Angeles County)
Looking for an FHA Loan in Torrance California?
An FHA loan is a home loan that’s insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA mortgages require 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 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 requirements.
The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide lending companies with adequate insurance; and to help spark the housing market by making home loans more accessible and attainable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Torrance, 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 Torrance 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 home 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 scenario.
Another advantage of an FHA home 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 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 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 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 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 very little even on a worst case rate change.
About Torrance California
For thousands of years, the area where Torrance is located was part of the Tongva Native American homeland.
In 1784, the Spanish Crown deeded Rancho San Pedro (including today’s Torrance), a tract of over 75,000 acres (300 km) in the Province of Las Californias of New Spain, to soldier Juan José Domínguez. It was later divided in 1846, with Governor Pío Pico granting Rancho de los Palos Verdes to José Loreto and Juan Capistrano Sepulveda in the Alta California territory of independent Mexico.
In the early 1900s, real estate developer Jared Sidney Torrance and other investors saw the value of creating a mixed industrial-residential community south of Los Angeles. They purchased part of an old Spanish land grant and hired landscape architect Frederick Law Olmsted Jr. to design a planned community. The resulting town was founded in October 1912 and named after Mr. Torrance. The city of Torrance was formally incorporated in May 1921, the townsite initially being bounded by Western Avenue on the east, Del Amo Boulevard on the north, Crenshaw Boulevard on the west, and on the south by Plaza Del Amo east of where it meets Carson Street, and by Carson Street west of where it meets Plaza Del Amo. The first residential avenue created in Torrance was Gramercy and the second avenue was Andreo. Many of the houses on these avenues turned 100 years of age in 2012. Both avenues are located in the area referred to as Old Town Torrance. This section of Torrance is under review to be classified as a historical district. Some of the early civic and residential buildings were designed by the renowned and innovative Southern California architect Irving Gill, in his distinctive combining of Mission Revival and early Modernist architecture.
One of the nation’s largest shopping centers grew in Torrance – Del Amo Fashion Center, and during the 1970s the Old Towne Mall combined themed amusement and nostalgia with shopping.
Torrance is a coastal community in southwestern Los Angeles County sharing the climate and geographical features common to the Greater Los Angeles area. Its boundaries are: Redondo Beach Boulevard and the cities of Lawndale and Gardena to the north; Western Avenue and the Harbor Gateway neighborhood of Los Angeles to the east; the Palos Verdes Hills with the cities of Lomita, Rolling Hills Estates and Palos Verdes Estates on the south; and the Pacific Ocean and the cities of Redondo Beach and Carson to the west. The western portion of Torrance is in ZIP Code 90277 which is a city of Redondo Beach postal address.
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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 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 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 Loans
In addition to its popular FHA loan, the FHA also insures other loan programs used by personal loan providers. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans assist property buyers buy a house– and remodel it– all with a single home loan. Property owners can also use the program to refinance their existing mortgage and add the expense of redesigning jobs into the new loan. FHA 203( k) loans can be found in two types:
- The limited 203( k) has a much easier application procedure, and the repairs or improvements must total $35,000 or less.
- The standard 203( k) requires extra documentation and applies to enhancements costing more than $5,000, however the total worth of the home should still fall within the FHA home loan limitation for the location.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is also guaranteed by the FHA. A HECM permits older homeowners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a part of their house’s equity. The amount that will be offered for withdrawal differs by borrower and depends upon the age of the youngest debtor or qualified non-borrowing spouse, existing interest rates and the lesser of the home’s assessed worth or the HECM FHA home loan limitation or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient mortgages backed by the FHA allow property buyers to purchase houses that are already energy efficient, such as EnergyStar-certified structures. Or they can be utilized to purchase and redesign older homes with energy-efficient, or “green,” updates and roll the costs of the upgrades into the loan without a larger down payment.
- FHA Section 245( a) loan – Also known as the Graduated Payment Mortgage, this program is geared at debtors whose incomes will increase gradually. You start out with smaller regular monthly payments that gradually increase. Five specific strategies are available: 3 plans that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other strategies set payment boosts 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 2023
For 2019, the flooring limitation for FHA loans in the majority of the nation is $314,827, up from $294,515 in 2018. For high-cost locations, the ceiling is $726,525, up from $679,650 a year back. These limits are referred to as “ceilings” and “floorings” that FHA will guarantee. FHA updates restrict amounts each year in action to altering home rates.
FHA is required by law to adjust its quantities based on the loan limits 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 differ according to the expense of living in a specific location, and can be various from one county to the next. Areas with a greater cost of living will have greater limitations, and vice versa. Unique exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more costly.
FHA Loan Relief
Loan servicers can use some versatility on FHA loan requirements to those who have actually suffered a serious monetary challenge or are struggling to make their payments.
That relief might be in the form of a temporary period of forbearance, a loan adjustment that would decrease the interest rate, 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 Torrance CA?
The FHA makes it relatively simple to qualify for a mortgage. Again, the government guarantees the loan, so lending companies are more willing to approve loans. 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 Torrance CA, you might have better luck with shopping around for a better option.
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 Torrance to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the mortgage 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 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 proves good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Borrowers get their home loans from FHA-approved loan providers in Torrance instead of the FHA itself, which only insures 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 community banks and independent home mortgage loan providers. Expenses, services and underwriting standards differ among loan providers or mortgage brokers, so it’s important to shop around.
Discover more about how to find low FHA mortgage loan provider.