FHA Loans

Isra Ziade

Isra Ziade

Isra is the Marketing Director of EZ Fundings Home Loans who loves to share good vibes and mortgage tips and market updates to people. As a Mortgage Mama, she desires to bring families home just like her own family. She is also a Glow and Grow Mentor.

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If you thought home buying in California was impossible for you, you might want to think again. Through California FHA Loans, home buyers with poor credit scores and who need small down payments are given opportunities to realize their homeownership goals.

FHA Loans Explained

An FHA (Federal Housing Administration) loan is a type of residential mortgage that helps borrowers use it to buy real estate. This loan can also help refinance a mortgage already attached to their home. As the name suggests, this loan is backed by the federal government while the Federal Housing Administration oversees the program in California. Please note that the FHA loan rates are different from jumbo and conventional loans.  

These loans are funded by FHA-approved lenders or banks. However, as the risk may be high, the federal government is responsible for guaranteeing these loans. These are separated from the other loan programs available in California. This further means that if a borrower defaults on the FHA loan, the mortgage lender shall be reimbursed by the Federal Housing Administration.  

Requirements You Need to Meet When You Apply for FHA Loan

The FHA down payment requirement is 3.5 percent of the purchase value. However, it may increase to ten percent if your credit score is lower than 580. But the good news is that there are numerous down payment assistance programs available in California that can help you arrange the funds, for example:

  1. CalHome Program
  2. First Home Mortgage Program
  3. My Home Assistance Program

Other requirements include:

  • Employment history of 2 years
  • Income fully documented for the last two years
  • FICO score should be a minimum of 500
  • MIP (Mortgage Insurance Premium) is required
  • 43 percent maximum DIT ratio (with some exceptions)
  • The home you’re planning to buy should be your main/primary residence
  • You should not have foreclosures or bankruptcies in the last two years

Properties You Can Buy With an FHA Loan

FHA loans are only allowed for owner-occupied residential properties. Hence, you can’t use it to buy all types of properties. This loan can only be used for purchasing:

  • Single Family Residence
  • Condos
  • Townhouses
  • 2, 3 and 4 unit properties (however, you must live in one of the units)
  • Loan Amount
FHA Loans - Buildings

As of 2021, the California FHA home loan limit in most counties is $356,362. However, in high-cost counties of California, the loan limit is higher- up to $822,375.

Types of FHA Loans

Here are some of the most common types of FHA loans:

  • Basic Home Mortgage 203(b)- where the rates are fixed or adjustable. It can be used to buy or refinance a primary residence with a low minimum down payment, but you can’t use it if the home you want to purchase needs over $5000 in repair.
  • 203 K rehab Mortgage:It finances your purchase as well as renovation. A qualified professional must perform the renovation, and it should not take more than six months.
  • Energy-Efficient Mortgage (EEM)- It finances your energy-efficient upgrades when buying a home or refinancing it. Use it to make your home energy efficient.

Contact us for more information about FHA loans in California or home buying assistance. We are your trusted industry experts.

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