FHA Loans in California
If you don’t qualify for conventional mortgages, it doesn’t mean your dreams of homeownership are out of reach. With our Federal Housing Administration (FHA) loans, you can make your goal of owning a home a reality. Let Standard Lenders help you live the American Dream.Get Started
What is an FHA Loan?
An FHA loan is a government-backed mortgage that is guaranteed by the US Federal Housing Administration. The FHA itself does not provide the loans but insures the mortgages that are issued by FHA-approved private lenders. This loan product is designed to help low to middle-income Americans that don’t qualify for conventional loans to become homeowners.
FHA mortgages have more lenient requirements than conventional loans, which makes them popular with first-time homebuyers. These looser financial requirements, however, pose an increased risk to lenders. As a result, FHA loan borrowers must pay a two-part mortgage insurance to compensate for this increased risk.
Types of FHA Loans
Although FHA mortgages are geared more towards new homeowners, the program has been modified to accommodate diverse home loan needs. In addition to traditional mortgages for first-time homebuyers, FHA also offers reverse mortgages and loans for home improvement. Here are the five most common types of FHA loans in California:Although FHA mortgages are geared more towards new homeowners, the program has been modified to accommodate diverse home loan needs. In addition to traditional mortgages for first-time homebuyers, FHA also offers reverse mortgages and loans for home improvement. Here are the five most common types of FHA loans in California:
1. FHA 203(b) loan
FHA’s 203(b) loan is a basic mortgage that can be used to purchase or refinance a home. These loans come in standard 15-year and 30-year periods and have fixed or adjustable-rate options. You can use these loans to purchase multiple types of property such as single-family homes, 2-to-4 unit multi-family owner-occupied homes, and manufactured homes.
2. Home equity conversion mortgage (HECM)
HECM is a reverse mortgage program that is designed for borrowers over the age of 62. This FHA loan product allows seniors that have a significant share or fully own their homes to cash in on a portion of the home’s equity. The funds are available as fixed monthly payments, a line of credit, or a single disbursement lump sum.
3. FHA 203(k) loan
The FHA 203(k) loan allows you to take out a mortgage to pay for both home purchase and home renovation. This FHA loan can be useful if you don’t have much cash on hand to repair the property after making a down payment. Homeowners can also use this program to refinance their mortgage and add the cost of remodeling to the new loan.
4. FHA energy efficient mortgage (EEM)
EEMs provide funds to purchase “green” properties or make your existing home more energy-efficient. A popular FHA loan in California, this program can be used to buy an ENERGY STAR certified home, or to pay for home improvements that lower your utility bills. You can lump the costs of the upgrades into the loan without making a larger down payment.
5. FHA 245(a) loan
The 245(a) loan ⏤ also known as the growing equity mortgage ⏤ is geared at borrowers who expect to see a rise in their income during the course of the loan. Ideal for young families and those that are just starting out in life, this FHA loan starts with low initial monthly payments that gradually go up as your income increases.
Requirements of FHA Loans
Although easier to get than conventional loans, you still need to satisfy several requirements to qualify for FHA mortgages. Lenders will do a background check on you as they would with any other mortgage applicant. However, instead of analyzing your credit report, lenders will look at your employment history, rent payments, and other financial records within the past two years to determine if you’re a good candidate for this loan.
You must meet the following requirements to get approved for an FHA loan in California:
- A minimum credit score of 500
- A 10% down payment with a credit score of 500 to 579
- A 3.5% down payment with a credit score of 580+
- Steady employment history for the last two years
- A debt-to-income (DTI) ratio that is lower than 43%
- The home must comply with HUD’s minimum property standards
Get the Best FHA Loan Deals With Standard Lenders
Finding the right FHA mortgage for your financial circumstances can be a time-consuming and frustrating process. Whether you’re a first-time homebuyer or a retired homeowner in need of increased cash flow, Standard Lenders will help you from beginning to end to make the loan process as seamless and hassle-free as possible.
We use our strong relationships with the nation’s top lenders to find you the most competitive FHA loans in California. Our government-licensed counselors connect with clients via phone, email, or within the comfort of their homes to educate them on all suitable options so they can make informed decisions.
Common Questions About FHA Loans
What are the downsides of FHA mortgages?
Although easier to qualify for, FHA mortgages do have their downsides. You must pay not one but two mortgage insurance premiums (upfront + annual) to receive these loans. This makes FHA mortgages more expensive over time compared to conventional loans. Other loan types can help you save more money in the long run through fewer insurance payments.
Do FHA loans have income limits?
The FHA does not impose minimum or maximum income limits for loan qualification. Therefore, you cannot make too much or too little money to get approved for FHA loans in California. As long as you have a stable job and a DTI below 43%, borrowers of any income level can apply for HUD’s government-insured mortgages.
What is the FHA loan limit for 2021?
The FHA sets loan limits depending on the region in which you live. In 2021, the FHA loan limit for single-family homes in low-cost areas is $356,362. For high-cost regions of the country, the loan limit is set at $822,375 for single-family homes.
Can I use an FHA mortgage to buy an investment property?
FHA mortgages are intended to finance the purchase of primary residence properties. However, there are some workarounds that can help you buy income property with an FHA mortgage. FHA allows you to purchase multi-unit dwellings as long as you occupy one of the units. You can also buy a second property if the home is 100 miles away from your primary residence.