- The U.S. Department of Housing and Urban Development (HUD) oversees the FHA mortgage program. It is funded by the money it earns and does not cost the tax payers anything to administer. FHA does not lend money directly. It insures loans made by private lenders for owner-occupied, single-family homes and properties containing up to four units. The mortgage holders have more confidence in FHA-insured loans and lends money with a small down payment.
- FHA allows you to place as little as 3.5 percent down on a home purchase. The insurance premium you are required to pay can be eliminated when you have 22 percent equity in the home or after you have owned it for five years. Also, FHA has more lenient credit score and loan-to-income ratio requirements than traditional mortgage programs, and sellers are allowed to pay up to 3 percent of your closing fees. You can use an FHA loan to buy a condominium unit, but at least 51 percent of the complex must be owner-occupied.
- The FHA national limit for loan amounts is $417,000, as of 2011. However, loan limits in California are higher and vary by county. FHA allows for larger loans to qualify for lending. The loan limit for California, as of 2011, is $729,750. Counties such as Alameda, Contra Costa, Los Angeles and Ventura have this maximum FHA limit. Other areas, such as Fresno, Mariposa and Kings County, use the lower national limit for loan amounts.
- You also can use an FHA loan to refinance your home in California. You can refinance from a traditional adjustable-rate mortgage from any lender to an FHA fixed rate. You also have the option of a cash-out refinance that allows you to borrow a portion of your equity. If you currently have an FHA loan, you can apply for a streamline procedure that allows you to lower your interest rate on a current FHA loan or to obtain a fixed rate on a FHA adjustable-rate mortgage.
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