Everything You Need to Know About Getting an FHA Loan in Los Angeles County

Los Angeles County is one of the most populous and diverse counties in the United States. With over 10 million residents, it contains world-famous cities like Los Angeles, Long Beach, and Santa Monica. It’s no wonder that so many people want to purchase homes in LA County.

If you’re looking to buy a home in Los Angeles County, you may be considering an FHA loan. FHA loans are a popular mortgage option especially for first-time homebuyers. Keep reading to learn everything you need to know about getting an FHA loan in LA County.

What is an FHA Loan?

FHA stands for Federal Housing Administration This government agency insures loans made by approved lenders to qualifying borrowers, An FHA loan requires only a 35% down payment and has more flexible credit requirements than conventional mortgages, This makes them ideal for buyers with limited funds or less-than-perfect credit,

With an FHA loan, if you default, the lender can make an insurance claim to the FHA. This protects the lender from loss in case of foreclosure. For buyers, FHA loans offer low down payments and lower credit scores needed.

FHA Loan Limits in Los Angeles County

The maximum FHA loan amount you can borrow depends on what county you buy in. Each county has FHA loan limits set by the Department of Housing and Urban Development (HUD) each year.

For a single-family home in LA County, the 2024 FHA loan limit is $1,149,825. The limit goes up for 2-4 unit properties:

• 1-unit: $1,149,825
• 2-units: $1,472,250
• 3-units: $1,779,525
• 4-units: $2,211,600

So if you’re buying a single-family house, condo, or townhome, you can borrow up to $1,149,825 with an FHA loan. If you opt for a 2-4 unit property as your primary residence, the limit is higher.

FHA Loan Requirements

To qualify for an FHA loan in LA County, you must meet certain requirements:

• Down payment – At least 3.5% of the purchase price. Can come from your own funds or a gift.

• Credit score – 580 minimum FICO score. Lower scores may be allowed with a larger down payment or other compensating factors.

• Debt-to-income ratio – Your total monthly debt payments cannot exceed 43% of your gross monthly income.

• Occupancy – You must plan to live in the home as your primary residence. Investment properties don’t qualify.

• Homebuyer education – If you’re a first-time buyer, you must complete an 8-hour homebuyer education course.

• Mortgage history – Any foreclosures or bankruptcies must be at least 2-3 years old. Late payments should be limited.

Provided you meet the requirements, an FHA loan can be a great mortgage option. The low down payment and flexible credit make it easier to buy a home.

How Much Can You Borrow?

As mentioned, the maximum FHA loan amount in Los Angeles County for 2024 is $1,149,825. But just because you qualify for that amount doesn’t mean you can afford it or should borrow the max.

The amount you can afford depends on factors like:

• Your income – Higher incomes support larger loans
• Other debts – The more debt you have, the lower loan amount you can afford
• Down payment saved – More down payment lowers the loan amount needed

A mortgage lender will analyze your income, debts, assets, and credit to determine the maximum loan amount you qualify for. This is based on your debt-to-income ratio not exceeding 43%.

You can use an FHA loan calculator to estimate your payment at different loan amounts. Go with the largest loan amount you’re comfortable with based on the monthly payment.

Finding an FHA Lender in Los Angeles County

To get approved for an FHA loan, you must use an FHA-approved lender. FHA lenders are banks and mortgage companies authorized to make government-backed loans.

Major national lenders like Bank of America, Chase, and Wells Fargo offer FHA loans in LA County. There are also smaller local lenders to choose from.

I recommend shopping rates from 3-4 different FHA lenders. Compare interest rates and fees to find the best deal. Here are a few top-rated FHA lenders in Los Angeles County to consider:

• New American Funding

• AimLoan.com

• HighTechLending

• Geneva Financial

The FHA Loan Process

Now let’s walk through the typical process of getting an FHA mortgage in Los Angeles County:

1. Get pre-approved – Most sellers require a pre-approval letter with your offer. Get pre-approved to show you’re a serious buyer.

2. Find a home and make an offer – Once pre-approved, you can confidently start home shopping. Make an offer when you find the right home.

3. Inspection performed – After offer accepted, hire a professional inspector to inspect the home’s condition.

4. Secure financing – Choose an FHA lender and complete the full mortgage application and documentation.

5. Appraisal ordered – The lender will order an appraisal to verify the home is worth at least the purchase price.

6. Final underwriting – The lender does final underwriting to confirm your eligibility and income documentation.

7. Closing scheduled – Once approved, you’ll sign final loan documents at closing and take possession of the home!

It typically takes 45-60 days to close on an FHA loan. The process is smoothest when you have a complete loan application, get documents in quickly, and promptly respond to any questions from your lender.

Pros and Cons of FHA Loans

FHA loans have unique advantages but also some potential drawbacks to consider:

Pros:

• Low 3.5% down payment requirement
• More flexible credit score and debt requirements
• Lower mortgage insurance premiums than conventional loans

Cons:

• Requires mortgage insurance for life of loan
• Limit on total amount you can borrow
• Upfront and annual mortgage insurance premiums

For many buyers, the pros of low down payment, better rates, and flexible credit outweigh the cons of mortgage insurance. But carefully weigh the pros and cons when deciding if an FHA loan is best for your situation.

Alternatives to FHA Loans

FHA loans are a great option for many LA County homebuyers. But here are a few alternatives to consider:

Conventional 97 Loan – Only 3% down and looser credit requirements than normal conventional mortgages. However, mortgage insurance is required.

VA Loan – For veterans and active military only. No down payment or mortgage insurance required. Must meet VA credit guidelines.

USDA Loan – For properties in designated rural areas only. 100% financing available for low-income buyers.

Down payment assistance programs – Local and state programs provide grants for down payment and closing costs. Income limits apply.

Talk to a few lenders to explore all your mortgage options beyond FHA. Make sure you choose the type of loan that best fits your needs.

Buying an FHA Home in Top LA Cities

Los Angeles County contains some of the most sought-after cities in California. Here’s a look at getting an FHA loan in a few popular LA cities:

Los Angeles – Standard FHA loan limits apply. Expensive hip neighborhoods like West Hollywood and Santa Monica have very limited inventory under $1M. Look in up-and-coming areas of LA for affordable options.

Long Beach – Condos may require project approval before you can use FHA financing. Check FHA condo approval status early in your search.

Santa Clarita – Located north of LA in Santa Clarita Valley. FHA loans work well here and the limits comfortably cover most home prices.

Lancaster – Farther north in Antelope Valley. Home prices are lower so FHA limits go far. Great area for first-time buyers.

Palmdale – Next door to Lancaster and also in Antelope Valley. Palmdale offers great value for FHA borrowers with home prices often under $500k.

Wherever you plan to live in sprawling LA County, shop lenders to find the best FHA mortgage rates and options. The low down payment requirement makes it easier than ever to finally buy a home.

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