How To Qualify For FHA Loan in Valencia California (San Bernardino County)

How To Qualify For FHA Loan in Valencia California (San Bernardino County)

Looking for an FHA Loan in Valencia 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 significant 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 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 much more accessible and affordable for home-buyers with not so great credit or a low down payment due to FHA mortgage limits in Valencia, California. Essentially, the federal government insures loans for FHA-approved mortgage companies in order to reduce their risk of loss if a borrower defaults on their home loan payments.

Because of that insurance, mortgage companies 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 Valencia 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 approved 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 San Bernardino 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 mortgage loan programs will permit 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 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 adjustment. This insures that the payment adjustment will be minimal even on a worst case rate change.

About Valencia California

The area is the traditional lands of Native Americans. The Tataviam people migrated in here in 450 CE when the Chumash people were living here.

Newhall Ranch was ranched and farmed until the 1960s when Newhall Land and Farming Company started a community named after a crop that was grown there, the Valencia orange. The completion of Interstate 5 through the Santa Clarita Valley in 1967 provided an improved route south into the San Fernando Valley. The same year, Newhall Land finished construction of the first homes in Valencia. With stores, parks, hospitals and schools, the community was intended to be self-contained. When it incorporated in 1987, the city of Santa Clarita combined four communities, including most of the built out portion of Valencia, to form a city of 25,000. Although this was the only city, the population of the entire Santa Clarita Valley had reached 125,000. In the late 1980s, Newhall Land had one of the last big parcels of undeveloped real estate near Los Angeles with the 37,250-acre (15,070 ha) Newhall Ranch. They estimated that ten thousand acres (4,000 ha) was developable and about 3,500 acres (1,400 ha) of the master planned Valencia neighborhood had already been built out with 8,000 single-family houses, apartments, and condominiums. Nearly all of the homes were built by the Newhall Land company and they had approvals for some 3,000 additional homes. The area slated for industrial parks, that already had 300 companies and their 8,500 employees, was expanding. Much of the land for industrial and commercial development was sold to other companies to be developed.

The Northridge Earthquake fractured an ARCO pipeline just east of Interstate 5 in 1994.

While concerns were raised over the proposed Westridge golf course community in 1992 over the removal of oak trees for road construction, Newhall Land began construction in 1998 on the Westridge community located north of Stevenson Ranch. This adjacent community had been developed by Dale Poe Development Corp. in the previous decade after Newhall Land sold them the property. Located west of Interstate 5, the TPC Valencia golf course in Westridge was renamed The Oaks Club at Valencia in 2018.

Newhall Land started construction on the Valencia Marketplace in 1995 which became a major commercial center and a major source of sales tax revenue for unincorporated Valencia. By 1996, Newhall Land had developed 5,000 acres (2,000 ha) in Valencia with some 12,000 homes. In 1998, Valencia area had 1.1 million square feet of industrial space under construction with a 2% vacancy rate in the existing developments. The unincorporated area northwest of the intersection of Interstate 5 and State Route 126 had plenty of acreage and entitlements to accommodate additional industrial space. Valencia Commerce Center and IAC Commerce Center are master-planned business parks with mixed-use with office, industrial and retail. Centered on Commerce Center Drive, major tenants include Remo, Pharmavite, Mechanix Wear, and ITT Aerospace Controls.

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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 Bernardino 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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Types of FHA Home Loans

In addition to its popular FHA loan, the FHA likewise insures other loan programs offered by private lending institutions. Here’s a look at each of them.

  • FHA 203( k) loans – These FHA loans help homebuyers purchase a house– and renovate it– all with a single mortgage. Property owners can also utilize the program to refinance their existing mortgage and include the expense of renovating jobs into the brand-new loan. FHA 203( k) loans can be found in two types:
    • The minimal 203( k) has a simpler application procedure, and the repairs or enhancements should amount to $35,000 or less.
    • The standard 203( k) requires additional paperwork and applies to enhancements costing more than $5,000, but the overall value of the property should still fall within the FHA home loan limit for the area.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is also guaranteed by the FHA. A HECM allows older house owners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a part of their home’s equity. The amount that will be readily available for withdrawal varies by borrower and depends upon the age of the youngest debtor or qualified non-borrowing spouse, existing interest rates and the lesser of the house’s assessed value or the HECM FHA home loan limit or list prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA permit property buyers to buy houses that are already energy efficient, such as EnergyStar-certified buildings. Or they can be used 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 deposit.
  • FHA Section 245( a) loan – Also known as the Graduated Payment Mortgage, this program is geared at debtors whose incomes will increase in time. You start out with smaller regular monthly payments that slowly increase. 5 specific strategies are readily available: 3 plans that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other plans set payment increases over 10 years at 2 percent and 3 percent every year.

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FHA Loan Limits for 2022

For 2019, the flooring 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 earlier. These limits are referred to as “ceilings” and “floorings” that FHA will guarantee. FHA updates restrict quantities each year in response to changing home rates.

FHA is required by law to change its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard home mortgages ensured 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 different from one county to the next. Areas with a higher expense of living will have higher limitations, and vice versa. Unique exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house building and construction is more expensive.

FHA Loan Relief

Loan servicers can offer some flexibility on FHA loan requirements to those who have actually suffered a severe financial hardship 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 lower the rates of interest, extend the repayment duration, 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 Valencia CA?

The FHA makes it relatively easy to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage lenders are more willing to approve mortgage 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 Valencia 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 Valencia 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 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 mortgage.

How to Find FHA Lenders

Debtors get their mortgage from FHA-approved lenders in Valencia instead of the FHA itself, which just insures the loans. FHA-approved loan providers can have different rates and expenses, even for the very same loan.

FHA loans are available through lots of sources– from the greatest banks and credit unions to neighborhood banks and independent mortgage lenders. Expenses, services and underwriting standards vary among lenders or mortgage brokers, so it’s essential to search.

Discover more about how to discover low FHA home mortgage lending institution.


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