How To Qualify For FHA Loan in Woodland Acres California (Santa Clara County)

How To Qualify For FHA Loan in Woodland Acres California (Santa Clara County)

Looking for an FHA Loan in Woodland Acres California?

FHA loans have been a flexible home loan program that’s been around since the 1930’s and is insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA loans require more 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 significant to remember though, that the lower the credit worthiness, 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 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 home loans more accessible and affordable for home-buyers with not so great credit or a low down payment due to FHA mortgage limits in Woodland Acres, 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 mortgages at beneficial 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 Woodland Acres 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.

Consumers 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 mortgage is that it’s an assumable mortgage loan 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 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 mortgage loan programs will make it possible for 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 changes 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 very little even on a worst case rate change.

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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 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 Loans

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

  • FHA 203( k) loans – These FHA loans assist homebuyers buy a home– and refurbish it– all with a single home mortgage. House owners can likewise utilize the program to refinance their current mortgage and include the expense of remodeling jobs into the brand-new loan. FHA 203( k) loans come in 2 types:
    • The limited 203( k) has an easier application procedure, and the repair work or improvements should total $35,000 or less.
    • The basic 203( k) needs extra documents and applies to improvements costing more than $5,000, however the overall worth of the residential or commercial property must still fall within the FHA home loan limitation for the area.
  • Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home mortgage and is likewise guaranteed by the FHA. A HECM permits older property owners (aged 62 and up) with significant equity or those who own their houses outright to withdraw a portion of their home’s equity. The amount that will be offered for withdrawal differs by borrower and depends on the age of the youngest debtor or eligible non-borrowing partner, present rates of interest and the lesser of the house’s evaluated worth or the HECM FHA mortgage limitation or prices.
  • FHA Energy Efficient Mortgage (EEM) program – Energy efficient home mortgages backed by the FHA allow homebuyers to purchase homes that are already energy effective, such as EnergyStar-certified structures. Or they can be utilized to purchase and renovate older homes with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger deposit.
  • FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is geared at borrowers whose incomes will increase gradually. You begin with smaller sized monthly payments that slowly increase. Five specific strategies are readily available: three strategies that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent each year. 2 other strategies set payment increases over 10 years at 2 percent and 3 percent every year.

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FHA Loan Limits for 2023

For 2019, the floor limitation for FHA loans in the majority of the nation is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year ago. These limits are referred to as “ceilings” and “floors” that FHA will insure. FHA updates restrict quantities each year in response to altering house 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 traditional home loans guaranteed or owned by Fannie Mae and Freddie Mac. Ceiling and flooring limitations vary according to the cost of living in a specific location, and can be various from one county to the next. Locations with a greater expense of living will have greater limitations, and vice versa. Unique exceptions are produced real estate 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 serious financial 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 reduce the rate of interest, extend the repayment 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 Woodland Acres CA?

The FHA makes it relatively simple to qualify for a home loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve home loans. However, mortgage lenders can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Woodland Acres 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 Woodland Acres to find out for sure.

Income limits: there are none. You’ll need enough to show that you can repay the 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 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 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

Debtors get their home mortgage from FHA-approved lenders in Woodland Acres instead of the FHA itself, which just insures the loans. FHA-approved lending institutions can have various rates and expenses, even for the same loan.

FHA loans are readily available through lots of sources– from the greatest banks and cooperative credit union to neighborhood banks and independent home mortgage loan providers. Costs, services and underwriting standards vary amongst lenders or home mortgage brokers, so it’s essential to look around.

Find out more about how to find low FHA home mortgage lender.


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