With the value of real estate in San Diego being as high as it is and predicted to rise, the thought of scraping together a 20% down payment is intimidating to many potential buyers.
Fortunately, FHA mortgage loans were designed specifically with these borrowers in mind.
Discover how you can secure an FHA mortgage loan and establish your own place in the booming San Diego housing market.
Fact 1 - FHA Mortgage Loans are Designed to Provide More Opportunity for Interested Buyers to Become Homeowners.
Whether a less-than-perfect credit score or the dollar figure of a 20% down payment has discouraged you from making your dreams of home ownership a reality, FHA mortgage loans are specifically designed for you.
These mortgages require a minimum down payment of 3.5%, which can even be gifted by family members. This low down payment option is offered to those with credit scores of 580 or higher.
Even if your credit score falls into the 500-579 range, though, you can still receive an FHA mortgage loan with a 10% down payment.
The CalHFA FHA Loan program is an FHA-insured loan with a fixed interest rate, meant to give lenders peace of mind when lending and encourage homeownership.
What buyers will need is proof of steady employment for the last two years and a valid Social Security number or proof of lawful residency. According to Zillow, a borrower’s mortgage payment (including HOA fees, property taxes, mortgage insurance, and homeowner’s insurance) should be less than 40% of their gross income. Mortgage plus debt should be less than 43% of gross income, but in special circumstances, can be as much as 50%.
Fact 2 - You Can Qualify Even with a Bankruptcy or Foreclosure in Your Past.
Even buyers who have previously run into financial trouble can qualify for FHA mortgage loans.
If you’ve maintained good credit since declaring bankruptcy and that bankruptcy occurred at least two years ago, it is possible to successfully apply. Extenuating circumstances are also considered by lenders in this program.
Those who are at least three years past a foreclosure and who have maintained good credit can also receive an FHA mortgage loan.
Before contacting a lender, be sure to have your employment history, bank statements, previous tax returns, and pay stubs ready, plus any documentation of extenuating circumstances that impacted your financial situation.
Fact 3 - FHA Mortgage Loans Can be Combined with Other California Programs for Home Buyers.
California offers other programs in combination with FHA mortgage loans to assist qualified buyers.
The MyHome Assistance Program is a deferred-payment junior loan, which offers up to 3.5% of the appraised value or purchase price of a home to help with a down payment or closing costs.
That means that even potential buyers without a 3.5% down payment at the ready should still apply for an FHA mortgage loan.
Another California-based program to consider is the School Teacher and Employee Assistance Program (School Program).
First-time home buyers who work for a California K-12 school or county or continuation school qualify for this program. These junior loans offer up to 4% of the purchase price of a home and can be used for a down payment or closing costs.
Fact 4 - Various Types of Housing are Eligible for FHA Mortgage Loans.
Single-family homes aren’t the only real estate one can purchase with an FHA mortgage loan.
The sales price for these loans cannot exceed $660,000, with loans above $453,100 subject to additional fees.
The good news is they can be used to buy a condo, PUD, or manufactured home on a permanent foundation.
Even guest houses and “in-law” quarters are eligible, as long as they conform to local zoning laws and are approved for single-family occupancy.
Fact 5 - Other Requirements, Such as Income Limits, Do Apply.
Effective January 16, 2019 , household income may not exceed $157,050 to qualify for an FHA mortgage loan. This includes the income of anyone liable on the mortgage, vested in the title, and living in the home.
Borrowers must move into the property within sixty days as their primary residence.
First-time home buyers should also be aware they will need a one-year home warranty protection policy. At a minimum, this policy should cover the water heater or heaters,air conditioning, heating, and oven/stove/range. The exception to this rule is for new construction whereto builder provides the home warranty.
Buyers purchasing with a co-signer should also be aware of certain restrictions. Co-signers cannot live on the property and can’t be on the title or have a vested interest in the property. They must have their financial history reviewed by underwriters and must sign all loan documents.
If you’re interested in seeing if an FHA mortgage loan could be your path to home ownership, please contact me, and I’ll be able to help.
Leave me a comment below – or, call/text me at (760) 297-4539.
Your FHA Mortgage Insider,