How To Qualify For FHA Loan in Two Harbors California (Los Angeles County)

How To Qualify For FHA Loan in Two Harbors California (Los Angeles County)

Looking for an FHA Loan in Two Harbors 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 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 score, 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 requirements.

The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide lending companies with sufficient insurance; and to help spark the housing market by making mortgages more accessible and attainable for people with less than stellar credit or a low down payment due to FHA mortgage limits in Two Harbors, California. Essentially, the federal government insures loans for FHA-approved mortgage 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.


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Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements

Typically an FHA loan in Two Harbors 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 mortgage loan.

Borrowers 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 home loan is that it’s an assumable mortgage 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 mortgage 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 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 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 modification. This insures that the payment adjustment will be very little even on a worst case rate change.

About Two Harbors California

The area where Two Harbors is located was originally referred to simply as the Isthmus of Catalina Island. By the 1860s, mining operations for silver, lead and zinc took place in the area. In 1864, during the Civil War, the Union Army sent 83 soldiers to the island to establish Camp Santa Catalina Island, both to protect the area from Confederate privateers and survey the isthmus and adjacent Catalina Harbor for the Bureau of Indian Affairs as a location for a future Indian reservation for “militant” tribes captured in the Bald Hills War. However, the reservation idea was abandoned and so was the camp. The barracks that the Army built on the isthmus were later used to house visiting film crews in the 1920s and 1930s, a contingent of the U.S. Coast Guard during World War II, and in 1951 became the home of the Isthmus Yacht Club.

The Ning Po, a Chinese merchant ship built in 1753 and involved in over a century of war, rebellion, and piracy, eventually found its way to Catalina and was converted into a tourist attraction in 1913. The Ning Po burned off the western shore of the isthmus in 1938. The fire which destroyed her also claimed several wooden sailing vessels that had been used in filming motion-picture “spectaculars”, including the famous old down-Easter “Llewellyn J. Morse” which stood in for the USS Constitution — with accurate re-rigging — in the silent film Old Ironsides.

Two Harbors is a small island village located approximately 37 km (23 mi) from San Pedro Harbor on Santa Catalina Island. On the island’s narrow isthmus, it is located about 18 miles from the only city on the island, Avalon. It is named for the two harbors separated by the 770 m section of land separating the leeward (northern) Isthmus Cove (aka Banning Harbor) and Catalina (or Cat) Harbor on the windward (southern) side, which together almost cut off the northwestern sixth (31.7 km²) from the main part of the island. White Rock Island, commonly known as Bird Rock, is a small privately owned island only 6312 m² in size. It is approximately 1.4 km (0.87 mi) northeast of Two Harbors, offshore from Isthmus Cove, and 470 m (1,540 ft) northwest of the closest coastal point.

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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 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.


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Kinds Of FHA Loans

In addition to its popular FHA loan, the FHA also insures other loan programs provided by personal lenders. Here’s a take a look at each of them.

  • FHA 203( k) loans – These FHA loans help property buyers buy a home– and renovate it– all with a single home mortgage. Property owners can likewise utilize the program to re-finance their current home loan and add the cost of renovating projects into the brand-new loan. FHA 203( k) loans been available in two types:
    • The restricted 203( k) has a much easier application procedure, and the repair work or enhancements must amount to $35,000 or less.
    • The basic 203( k) needs additional documents and applies to improvements costing more than $5,000, but the overall worth of the property need to still fall within the FHA mortgage limit for the area.
  • House Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse mortgage and is likewise guaranteed by the FHA. A HECM enables older property owners (aged 62 and up) with considerable equity or those who own their homes outright to withdraw a part of their house’s equity. The amount that will be readily available for withdrawal varies by borrower and depends upon the age of the youngest customer or eligible non-borrowing spouse, current rates of interest and the lesser of the house’s assessed value or the HECM FHA mortgage limitation or list prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy effective home loans backed by the FHA permit property buyers to purchase houses that are already energy effective, such as EnergyStar-certified buildings. Or they can be utilized to purchase and redesign 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 tailored at borrowers whose earnings will increase with time. You start with smaller sized month-to-month payments that slowly go up. Five specific plans are offered: 3 strategies that allow five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 other plans set payment boosts over 10 years at 2 percent and 3 percent yearly.

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FHA Loan Limits for 2023

For 2019, the flooring limit for FHA loans in most of the country 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 described as “ceilings” and “floorings” that FHA will guarantee. FHA updates restrict quantities each year in reaction to changing house prices.

FHA is needed by law to change its amounts based upon the loan limits set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations vary according to the cost of living in a particular location, and can be various from one county to the next. Areas with a greater cost of living will have higher limits, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building and construction is more costly.

FHA Loan Relief

Loan servicers can provide some flexibility on FHA loan requirements to those who have actually suffered a serious financial difficulty 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 modification that would reduce the rate of interest, extend the repayment duration, 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 Two Harbors CA?

The FHA makes it relatively easy to qualify for a 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 Two Harbors CA, you might have better luck with looking around for 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 Two Harbors 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 applicants. 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 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

Borrowers get their home loans from FHA-approved lenders in Two Harbors rather than the FHA itself, which just guarantees the loans. FHA-approved lenders can have various rates and costs, even for the exact same loan.

FHA loans are readily available through lots of sources– from the biggest banks and cooperative credit union to community banks and independent home loan lending institutions. Expenses, services and underwriting standards vary amongst lenders or home mortgage brokers, so it’s crucial to shop around.

Discover more about how to find low FHA home loan lending institution.


(Or call 213-474-7389 to ask a local lender anything!)