How To Qualify For FHA Loan in Willow Glen California (Santa Clara County)

How To Qualify For FHA Loan in Willow Glen California (Santa Clara County)

Looking for an FHA Loan in Willow Glen California?

FHA loans have been a flexible home loan 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 home loans require lower 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 rating can be between 500 – 579 if a 10% down payment is made. It’s significant 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 lenders with sufficient insurance; and to help stimulate the housing market by making mortgages much more accessible and affordable for home-buyers with less than perfect credit or a low down payment due to FHA mortgage limits in Willow Glen, 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 lenders can, and do, offer FHA mortgages 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 Willow Glen 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 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 Santa Clara 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 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 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 time frame. The 3/1 and 5/1 FHA Hybrid products make it possible for 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 Willow Glen 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 home loan or to buy the property. 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 Santa Clara 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!)

Kinds Of FHA Home Loans

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

  • FHA 203( k) loans – These FHA loans assist homebuyers acquire a home– and renovate it– all with a single home mortgage. House owners can also use the program to re-finance their existing mortgage and add the cost of renovating jobs into the new loan. FHA 203( k) loans can be found in 2 types:
    • The minimal 203( k) has a simpler application procedure, and the repairs or enhancements must total $35,000 or less.
    • The basic 203( k) needs extra documents and applies to enhancements costing more than $5,000, however the total worth of the property must still fall within the FHA mortgage limit for the area.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home mortgage and is likewise insured by the FHA. A HECM enables older property owners (aged 62 and up) with significant equity or those who own their homes outright to withdraw a portion of their home’s equity. The quantity that will be available for withdrawal differs by borrower and depends upon the age of the youngest customer or qualified non-borrowing spouse, existing interest rates and the lower of the home’s appraised value or the HECM FHA mortgage limit or sales price.
  • FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages 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 homes 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 called the Graduated Payment Mortgage, this program is tailored at borrowers whose earnings will increase in time. You start out with smaller sized monthly payments that gradually go up. Five specific plans are available: 3 strategies that enable five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each 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 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 referred to as “ceilings” and “floors” that FHA will guarantee. FHA updates restrict quantities each year in action to altering house rates.

FHA is needed by law to adjust its quantities based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard home loans ensured or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations differ according to the expense of living in a particular area, and can be various from one county to the next. Locations with a higher cost of living will have greater limits, and vice versa. Special exceptions are made for real estate in Alaska, Hawaii, Guam and the Virgin Islands, where house construction is more costly.

FHA Loan Relief

Loan servicers can provide some flexibility on FHA loan requirements to those who have actually suffered a major monetary hardship 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 lower 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 Willow Glen 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 home 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 Willow Glen CA, you might have better luck with 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 Willow Glen to find out for sure.

Income limits: there are none. You’ll need enough to show that you can repay the mortgage 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 mortgage from FHA-approved loan providers in Willow Glen rather than the FHA itself, which just insures the loans. FHA-approved lenders can have various rates and expenses, even for the same loan.

FHA loans are offered through many sources– from the greatest banks and credit unions to neighborhood banks and independent home loan loan providers. Expenses, services and underwriting requirements differ among lending institutions or mortgage brokers, so it’s essential to search.

Find out more about how to discover low FHA home loan loan provider.


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