The goal of the Federal Housing Administration (FHA) is to improve the housing market by insuring home loans made by approved lenders. Both buyers and lenders benefit from FHA loan programs. Homebuyers receive great rates and can qualify with low down payments and less than ideal credit while lenders are protected if a borrower were to default on their mortgage. The FHA offers loan options for purchases, refinances, special renovation projects. They also offer the only federally insured reverse mortgage. Fairway Independent Mortgage Company offers great rates on FHA loans throughout Walnut Creek, Concord, Lafayette, and Danville.
First-time homebuyers are often attracted to FHA loans given their low down payment and relaxed credit score requirements. Buyers can potentially qualify for an FHA loan with a credit score of 580 and a down payment of only 3.5%. If a buyer does not have the minimum down payment on hand, the FHA even allows it to be gifted from family. Loan limits vary by county and can range from $271,000 up to $636,500 in high-cost areas.
In addition to purchase loan options, cash-out refinance and streamline refinance programs are available for current FHA loan holders. To help protect borrowers, streamline refinancing is only available if the borrower will save money through the refinance. The FHA 203k loan is available to borrowers who want to purchase a home that needs work. This unique type of home loan allows a borrower to combine the purchase of a home and the cost of renovations and repairs into a single mortgage.
No matter what type of loan you need, certain requirements must be met for all California FHA loans.
California FHA Loan Requirements
- Credit Score – A minimum credit score of 580. Buyers with a score between 500 and 579 may still be able to qualify with a higher down payment.
- Debt-to-Income Requirements –A debt-to-income (DTI) ratio of 43% or less. A DTI ratio of up to 50% may be approved in special cases.
- Down Payment – 3.5% of the purchase price. As noted above, a higher down payment may be needed depending on a borrower’s credit score.
- Property Requirements – All properties must meet certain safety, security, and soundness (structural integrity) requirements.
Two mortgage insurance premiums (MIP) need to be paid with every FHA loan. One is an up-front premium of 1.75% of the purchase price. The up-front premium is automatically be added to your total mortgage amount at closing. The second premium is paid monthly as part of your mortgage payment and will be between .45% and 1.05% of your annual mortgage balance. The exact rate will be based on factors such as your total loan amount, the length of your mortgage, and your loan-to-value (LTV) ratio.
Whether you are looking to purchase your very first home in California, or are a current homeowner looking to refinance an existing FHA loan, at Fairway Independent Mortgage Company, we offer great rates and terms on all FHA loans. Contact us today for more information on FHA loans throughout Walnut Creek, Concord, Lafayette, and Danville, or to begin the pre-qualification process!