California borrowers with not-so-perfect credit can get FHA home loans
Did you know borrowers with not-so-perfect credit may be eligible for FHA home loans in California?
For borrowers with good credit and a 10-15% down payment, FHA loans tend to be more expensive than conventional loans but for borrowers with lower credit scores or a smaller down payment, FHA loans can often be the cheapest option!!
FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA), a government agency. The FHA doesn’t lend the money directly, private lenders do.
FHA Loans don’t have hard and fast rules!
FHA loans:
– Allow for down payments as low as 3.5 percent.
– Allow lower credit scores than most conventional loans.
– Have a maximum loan amount that varies by county.
But there are no hard-and-fast rules—a lot depends on the current market. If you’re not sure, you can ask Stephanie for quotes for both options and compare total costs to see which offers the best overall deal. Mortgage insurance is required for all FHA loans.
FHA loans can be helpful for first-time homebuyers, but you don’t have to be a first-time buyer to qualify. They also may be a good option if you have less-than-perfect credit since they have an easier qualifying process than most conventional home loans.
FHA Requirements & Limitations
We want you to be aware that there are requirements and limitations to FHA loans. The amount you can borrow is capped, if you’re taking out an FHA loan to take advantage of the low down payment, you’ll have to buy mortgage insurance, this is why Melissa and Stephanie review all aspects of your situation to guide you to the best choice.
Conventional loans have stricter credit requirements than FHA loans. FHA loans, which are backed by the Federal Housing Administration, offer the ability to get approved with a credit score as low as 580 and a minimum down payment of 3.5%. While conventional loans offer a slightly smaller down payment (3%), you must have a credit score of at least 620 to qualify.
More Important FHA Loan Info
When you’re deciding between a conventional loan and an FHA loan, it’s important to consider the cost of mortgage insurance.
If you put less than 10% down on an FHA loan, you’ll have to pay a mortgage insurance premium for the life of your loan – regardless of how much equity you have.
On the other hand, you won’t have to pay private mortgage insurance on a conventional loan once you reach 20% equity.
Wondering how to get a conventional home loan? Or if you meet conventional loan requirements?
So let’s get to brass tacks a conventional mortgage is one that’s not guaranteed or insured by the federal government.
Most conventional mortgages are “conforming,” which simply means that they meet the requirements to be sold to government-sponsored enterprises that purchase mortgages from lenders and sell them to investors. This frees up lenders’ funds so they can get more qualified buyers into homes.
Conventional mortgages can also be non-conforming, which means that they don’t meet the above government guidelines. One type of non-conforming conventional mortgage is a jumbo loan, which is a mortgage that exceeds conforming loan limits.
We’ve got more good tips and info for you! Check out the rest of this video series!