Something many California home buyers using FHA loans to buy a home don’t realize up front is that when they close on the loan, the FHA lender will take a certain amount of property taxes up front as a reserve. FHA loan guidelines require that property taxes and property insurance are paid with your mortgage payment to the FHA lender every month. So the FHA lender takes a large up front amount of property taxes in advance so they are able to pay your property taxes when they come due twice a year in California.
Property tax impounds on FHA loans in California are something you definitely need to be prepared for. They can amount to a very large chunk of money you will either need to have at closing or ask the seller to credit you for in your negotiations. Lenders take different amounts of property tax impounds at different times of the year. When closing in the February the up front property tax impounds on FHA loans in California are the lowest, as low as one month. But closing in the late fall they can be as high as 9 mos. This can amount to a very large up front sum of cash you must be prepared for to close your FHA loan mortgage in California.
In addition to property tax impounds, lenders will require that you pay a 12 months home insurance premium up front to qualify for a FHA loan in California. And on top of that, they will take an additional 3 month impound so they have the reserves to renew your insurance premium when it comes due if they have to.
So in summary, property tax impounds and insurance premiums can add a significant amount of cash you will need to close on your FHA mortgage loan in California on top of your 3.5% down payment. So be aware of this and make sure you get an estimate of how much this will be as early as you can in the process when you qualify for a FHA loan in California.
Give us an email (firstname.lastname@example.org) or call (858-922-7899) if you have any questions at all about getting a FHA home loan in California.
Sr. Loan Officer (FHA, VA and conventional loan specialist)