FHA Loan Requirements, Rates California 3.5% Down Payment | E Zip Mortgage

FHA Loan Requirements, Rates California

What Is an FHA Loan?

An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate-income borrowers, FHA loans require lower minimum down payments and credit scores than many conventional loans.

FHA loans allow you to borrow up to 96.5% of the value of a home with an FHA loan (meaning you’ll need to make a down payment of only 3.5%). You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA loan provided you can make a 10% down payment. With FHA loans, your down payment can come from savings or a financial gift from a family member.

All these factors make FHA loans popular with first-time homebuyers.

FHA Loan Down Payment Requirements

  • 3.5% Down Payment and it can be gifted.

  • Seller concessions up to 6% are allowed.

  • Credit Scores as Low as 580.

  • 3-year waiting period for prior short sales and foreclosures.

  • The minimum loan amount is 150,000.

How does an FHA Loan work?

A California FHA loan requires that you pay two types of mortgage insurance premiums—an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP (charged monthly). The Upfront MIP is equal to 1.75% of the base loan amount. You pay this at the time of closing, or it can be rolled into the loan. If you’re issued a home loan for $350,000, for example, you’ll pay an UFMIP of 1.75% x $350,000 = $6,125. The payments are deposited into an escrow account set up by the U.S. Treasury Department, and the funds are used to make mortgage payments in case you default on the loan.

FHA Loan Limits California

One limitation of FHA loans is that they have outside limits on how much you can borrow. These are set by the region in which you live, with low-cost areas having a lower limit (the “floor”) than the usual FHA loan and high-cost areas having a higher figure (the “ceiling”). Then there are “special exception” areas – including Alaska, Hawaii, Guam, and the U.S. Virgin Islands – where very high construction costs make the limits even higher. Everywhere else, the limit is set at 115% of the median home price for the county, as determined by the U.S. Dept. of Housing and Urban Development. 

California FHA county Loan Limits