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Q: What are the FHA loan limits in California?
A:FHA loans in California allow for very generous loan limits even with only 3.5% down.  This allows a borrower to use the flexible FHA loan program to buy homes in even the higher cost coastal areas of California.  Below is a chart of the 2011 FHA loan limits for the more populated counties in California:

simOne unit refers to a single-family home or condo/townhouse.  And 2 units a duplex, 3 units a triplex and 4 units  fourplex.  So in the highest limit counties, you could purchase a home or condo for $756,217 and only put 3.5% down.

Q: What is the minimum FHA loan down payment?

n the past 18 months real estate prices have risen in California enough in many cases for borrowers to refinance out of FHA loans with high monthly mortgage insurance to conventional loans at 80% or less loan-to-value with NO mortgage insurance.  If you have a FHA loan in California, don’t hesitate to contact me to and I can evaluate if this is worth while.

Refinancing from an FHA loan to a conventional could be a big money saver for you.  There is no reason to continue to pay the monthly mortgage insurance on a FHA loan if you property value has increased to where you FHA loan balance is no 80% or less than your current home value.

FHA loans originated before April 2013 will not allow you to get rid of your mortgage insurance until at least five years has passed since you originated your FHA loan AND until the loan balance is paid down to 78% of the original purchase price.  Even if five years has passed, you may be a long way from paying your loan balance down to 78% of the original purchase price.   FHA does not go off the current value when eliminating FHA mortgage insurance, they go off the original purchase price.  This is where a refinance to conventional loans comes into the picture.

Mortgage With No Credit Score in California

There are many people out there that want to get a mortgage to buy a home but for some reason they have no credit scores that report to the credit bureaus.  The main reason for this is these borrowers do not have any lines of credit that report to the credit bureaus.  They do not have any credit cards, student loans, car payments, etc… that would report payment history to the credit bureaus to give them a credit score.  But the great news is these borrowers without credit lines or credit score can still get 3.5% down FHA home loans in California.

Here’s how it works.  For a borrower to get a FHA home loan in California without credit scores, we would build what is called a “non-traditional” credit report for that borrower.  We would just require a minimum of three credit references each for 12 months.  This could be a utility bill, car insurance, cell phone bill, cable TV bill, rent, and other bills like this.  We would just need documentation that you paid three bills like this on time for 12 months and we can get you approved for a FHA home loan up to $729,750 with minimum of 3.5% down.  Some other factors to keep in mind about this loan:

• No major adverse public records filed the last 12 months
• No late payments on rent the last 12 months
• Maximum debt-to-income ratio 43% (add link)
• Two months of the housing payment in reserves required
• Full income verification required (two years tax returns, pay check stubs, w-2’s)

FHA home loans have more lenient credit quality requirements than conventional loans.  FHA will often allow a applicant to be approved for a FHA home loan even if their FHA loan credit score is not perfect.  Below are some facts about FHA loan credit requirements:

• You can get a FHA loan two years after a bankruptcy (conventional requires a four year wait)
• FHA home loans require a three year wait after foreclosure (conventional loans require a seven year wait)
• You can apply for a FHA loan three years after a short sale
• Your FHA credit score does not have to be perfect, you can still get excellent FHA interest rates with a 620 or above score.  If you score is below 620 we can review your score with your and help you strategize to quickly raise your score

Also, below are the two most common fixes you can make to your credit score to quickly raise it:

1. Make sure your credit card balances are below 30% of your total credit limits with that creditor

2. Read through your credit report thoroughly and check for mistakes.  If you find mistakes have them removed.

Changing these above two items can help quickly raise your score substantially.

Debt-to-income ratio (DTI) calculation is a very important part of the loan qualification process.  FHA home loans happen to allow the highest DTI of any home loan available today.  For example, FHA home loans will generally allow a borrower to go up to a 55% DTI with only 3.5% down payment.  Conventional home loans with anything less than 20% down with have a max DTI of 45%.

Here is how you calculation your debt-to-income ratio:

• First add up all of your debt.  This only includes debt that will show up on your credit such as car payments, student loan payments, and credit cards.  Let’s say you have a $300/mo car payment, $200/mo in student loans and $250/mo in credit cards.  That is $750/mo total in monthly debt obligation.
• Second calculate your total proposed housing payment.  This includes mortgage + property taxes + home insurance + mortgage insurance + hoa dues (if you have them).  Let’s say for this example all of this adds up to $2,750/mo.
• Take you total other debt of $750 + your total housing payment of $2,750 and you get $3,500/mo total debt.
• Next calculate the total monthly income of all borrowers on the loan.  Let’s just say this is $120,000 for purposes of this loan.  That would be $10,000 a month.
• Lastly, take your total debt of $3,500 and divide by your monthly income of $10,000 and you get a 35% debt-to-income ratio.  This is well below the FHA limit of 55%.

So I hope this makes it easy for you to calculate your debt-to-income ratio.  Don’t hesitate to call us or email if you have questions about calculating yours.

Many times borrowers will find when applying for a home loan that they are above the required debt-to-income ratio.  A common way to bring your debt-to-income ratios down are to pay off credit or loans that you may have to qualify for the loan or to by a lower priced house.  Another option with a FHA loan is you can get a non-occupant co-borrower.  This is often a relative that has good income and credit to be a co-borrower but does not have to live in the property.