How To Qualify For FHA Loan in Western Addition California (City and County of San Francisco)

How To Qualify For FHA Loan in Western Addition California (City and County of San Francisco)

Looking for an FHA Loan in Western Addition California?

FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is protected by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA mortgages require more flexible minimum credit scores and down payments than many commonplace 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 credit score can be between 500 – 579 if a 10% down payment is made. It’s important to remember though, that the lower the credit worthiness, 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 stimulate the housing market by making home loans highly accessible and attainable for consumers with less than stellar credit or a low down payment due to FHA mortgage limits in Western Addition, 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, 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 Western Addition 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 scenario.

Another advantage of an FHA home loan is that it’s an assumable mortgage 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 City and County of San Francisco. 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 home 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 changes annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products enable 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 Western Addition California

Other Cities You May Be Interested In

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 City and County of San Francisco. 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!)

Kinds Of FHA Home Loans

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

  • FHA 203( k) loans – These FHA loans assist property buyers purchase a home– and renovate it– all with a single home mortgage. Homeowners can likewise utilize the program to re-finance their existing home mortgage and add the expense of renovating projects into the brand-new loan. FHA 203( k) loans come in two types:
    • The limited 203( k) has a much easier application procedure, and the repairs or improvements must amount to $35,000 or less.
    • The standard 203( k) requires additional documents and applies to improvements costing more than $5,000, however the overall worth of the property 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 home loan and is likewise guaranteed by the FHA. A HECM enables older homeowners (aged 62 and up) with substantial equity or those who own their houses outright to withdraw a portion of their house’s equity. The quantity that will be offered for withdrawal differs by borrower and depends upon the age of the youngest customer or qualified non-borrowing partner, existing rates of interest and the lesser of the house’s appraised worth or the HECM FHA home mortgage limit or prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA enable property buyers to acquire houses that are already energy efficient, such as EnergyStar-certified structures. Or they can be utilized to buy and renovate older houses 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 tailored at customers whose incomes will increase with time. You start out with smaller regular monthly payments that slowly increase. 5 particular plans are available: three plans that permit 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. Two other strategies set payment increases 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 flooring limitation for FHA loans in most 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 reaction to altering house costs.

FHA is required by law to change its quantities based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for traditional mortgages ensured 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 higher expense of living will have greater limits, and vice versa. Unique exceptions are produced housing in Alaska, Hawaii, Guam and the Virgin Islands, where house building is more expensive.

FHA Loan Relief

Loan servicers can offer some flexibility on FHA loan requirements to those who have actually suffered a major monetary hardship or are having a hard time to make their payments.

That relief might be in the form of a temporary period of forbearance, a loan adjustment that would lower the rates of interest, extend the payback 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 Western Addition CA?

The FHA makes it relatively simple to qualify for a loan. Again, the government guarantees the loan, so lending companies are more willing to approve mortgage loans. However, lenders can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Western Addition CA, you might have better luck with another.

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 Western Addition 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 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 attests 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 loan providers in Western Addition instead of the FHA itself, which only guarantees the loans. FHA-approved loan providers can have different rates and costs, even for the very same loan.

FHA loans are offered through many sources– from the biggest banks and cooperative credit union to neighborhood banks and independent mortgage lenders. Expenses, services and underwriting requirements vary amongst loan providers or home mortgage brokers, so it’s crucial to search.

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


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