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FHA Financing

Flexible qualification to help middle- and low-income buyers.

The National Housing Act of 1934 created the Federal Housing Administration (FHA) to help first-time buyers and lower income Americans purchase a home. Today, the US Department of Housing and Urban Development (HUD) insures FHA loans.

The FHA loan is a low down payment mortgage that provides flexible qualification options to buyers who marginally qualify under conforming loan programs. It is popular with first-time and middle-to-low income buyers.

The most popular FHA loan program is the 203(b) fixed rate mortgage loan. This loan helps middle- to low-income buyers compete in high-demand areas (San Luis Obispo County) by offering loose credit guidelines and flexible down payment options.

The Basics:

  • Down payment: as low as 3.5%
  • Credit score: as low as 550
  • Debt-to-income ratio: as high as 47% housing ratio and 57% total debt ratio
  • Gift payments: allowed; 100% can be a gift from a relative, non-profit, or government agency
  • Rate and Term: fixed and adjustable rate options
  • Ceiling: $417,000 ($561,200 for high balance in San Luis Obispo County; $625,500 for high balance in SB County)
  • Occupancy: primary residence only
  • Mortgage Insurance: yes; up front and monthly fees apply (Read more)

The 203(k) mortgage loan offers funds for home rehabilitation and renovation. Borrowers can get unlimited funding for cosmetic repairs and functional upgrades.


  • Roof, gutter, and downspouts replacement and repair
  • Heating, ventilation, plumbing, electrical, septic replacement and repair
  • Painting, flooring, and weatherization
  • Purchase and installation of appliances.

The FHA Streamline Refinance is a simple way for FHA borrowers to lower their monthly mortgage payment by refinancing into a lower mortgage rate. Borrowers must  display a history of consistent payments, and reduce their monthly payments by 5%. No appraisal, no income qualification, no asset documentation.

The FHA back-to-work program offers buyers the ability to purchase a home just 12 months after a negative credit event. Otherwise:

  • Foreclosure: 3 years from transfer of title date
  • Short Sale: 3 years from relinquished date
  • Bankruptcy (Chapter 7): 2 years from discharge date
  • Bankruptcy (Chapter 13): 2 years from discharge date; 1 year payout has elapsed & payment performance is satisfactory & BK approval
  • Deed-in-Lieu: 3 years from transfer of deed date

Loan Requirements

  • Credit: Minimum 530 FICO (limits to LTV/CLTV may apply)
  • Loan Term: Fixed Rate Mortgage (FRM): 10 – 30 year terms
  • Max LTV: 580+ FICO and No Score: 96.5% LTV calculated per FHA Guides
    <580 FICO: Maximum 90% LTV
  • Occupancy: Owner Occupancy Only
  • Propery Eligibility:
    • New Construction: Modular (off-frame only), Manufactured (double-wide or larger), and Traditional Construction.
    • Manufactured Homes: Engineer must certify foundation plans meet FHA guides. Must be titled as real property or have recorded affixation affidavit.
    • Loan may include simultaneous purchase of the land/lot or loan can be guaranteed for the construction of home on land/lot already owned by borrower.
  • Credit History: Borrowers with traditional credit histories and credit scores will be underwritten on their own merits. Non-traditional and derogatory credit history considered… (Read more)



Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile