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FHA Loans California

First-time homebuyers in the Bear Republic can make their dreams come true with California FHA loans, the best way to afford a beautiful primary residence in this highly attractive state.
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Beautiful California is known for its wonderful weather, incredible culture, and laid-back lifestyle. Unfortunately, it’s also known for incredibly expensive homes — in August 2023, the median home price for single-family homes was a shocking $859,800, which is twice the national average of $407,100. Those with lower credit scores, a higher debt-to-income ratio, or a low income may feel like it’s impossible to afford property in this beautiful state, but thankfully, FHA loans can help.

District Lending is an FHA-approved lender, having helped thousands of Californians achieve FHA financing for their dream home. If you have a steady income but less-than-perfect credit, rely on District Lending, one of the premier mortgage lenders for a California FHA loan.

California FHA Loan

The average California salary is about $65,548 per year, which can put conventional loans out of reach for many borrowers. Thankfully, FHA loans help those of all means achieve their homeownership goals in high-cost areas. FHA loans are government-backed loans, meaning that the Federal Housing Administration (FHA) insures the mortgage.

FHA loans mean less risk for mortgage lenders, who will then be more willing to work with riskier borrowers. You'll enjoy a lower minimum down payment and competitive interest rates, particularly if you work with a mortgage lender like District Lending.
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California FHA Mortgage Requirements

When conventional loans or other loan types don't make sense for your financial situation, FHA loans have your back. The Federal Housing Administration (FHA), a subset of the Department of Housing and Urban Development, works with FHA lenders like District Lending to improve access to financing for those with lower credit scores and incomes.

Still, an FHA-insured mortgage will require borrowers to adhere to certain stipulations. Here's everything you need to know about FHA loan requirements.
  • Credit Score

    FHA loans do not have a minimum income requirement, but they look at your credit score to determine eligibility. FHA lenders, like credit unions or private mortgage lenders, typically want a minimum credit score of 580. You can have a credit score as low as 500, but you must provide a higher down payment.

    Before applying, be sure to work on your credit score so that it’s as attractive as possible. The Federal Trade Commission has a helpful guide explaining how you can start to repair your credit score to be approved for better interest rates.

  • Down Payments

    One of the reasons that borrowers love FHA loans is that you can provide a smaller down payment, approximately 3.5%, if you have a credit score of 580 or above. If you’re below this threshold, you will have to provide a 10% down payment, and you will also find it harder to get FHA lenders willing to work with you.

    Another important thing to note is that if you use gift funds as down payment assistance, you will need to provide a letter proving that it’s not a loan.

  • Personal Finances

    Another crucial component is your credit history, determined by running a credit report and looking at your pay stubs. This is to check your debt-to-income (DTI), which shows how much of your gross income goes to other debt. For an FHA home loan, you can have a slightly higher debt-to-income ratio than you can for conventional loans, but you should strive to have no more than 45% of your paycheck going to monthly payments on credit cards or other loans.

  • Closing Costs

    As with other loans, you will need to pay closing costs, which reimburse the professionals who helped organize all of the paperwork involved in a loan. These are typically about 3% to 6% of the overall loan value.

    A unique component of the FHA loan program is the upfront mortgage insurance premium (UMIP), typically about 1.75% of the loan amount. This insures the lender in case you cannot make your mortgage payments.

  • Real Estate Market

    It is important to note that FHA loans also have some stipulations about what property type you can purchase. Generally, factory-built housing, like mobile homes, is usually excluded from FHA loans. You will have to go through an FHA appraisal to identify that the home value matches the purchase price.

    Particularly critical in California is the FHA loan limit, which is below that for conventional mortgages. This limit is often lower than the median sales price for the given area for example, San Francisco has a median price of $1,730,000, much higher than the FHA loan limit of $1,149,825. Homes in Orange County, home of Anaheim and Buena Park, have a median sales price of $1,200,000, also higher than the FHA limit.

    Still, there are some pockets of affordability. Quirky little Fresno, located in the eponymous Fresno County, has a median sales price of $364,362, which is well below the FHA limit of $498,257. The cheapest area in California is Clearlake, with a median home price of $220,888. This is half of the limit for Lake County, creating endless possibilities for those who are willing to move a few hours away from major cities like San Francisco.

    Other affordable areas include Bakersfield in the Central Valley, with a median price of $380,100, and Eureka in the northern area of Humboldt, where housing costs $420,736 on average.

    You should work with a mortgage professional and a realtor to determine how much you can afford to borrow and where you can purchase a home within the loan limit.

California FHA Loan Limits

As California homes are so expensive, the maximum amount you can receive with an FHA loan is often higher here. It varies by county, with the lowest maximum loan amount being $498,257 and the highest being $1,149,825 in areas like San Francisco.
  • Credit Score

    Your credit score identifies the interest rates you’re eligible for and, thus, what your mortgage payment will be. The average Californian has about a 709 credit score, which would enable them to get competitive rates and a low down payment requirement.

    Quick Pre-Qualification With District Lending

    If you want to ensure you meet the FHA loan requirements, you can get a lightning-fast preapproval with District Lending. Use our online preapproval tool for California FHA loans and get an idea of how much home you can afford.

  • Down Payment Requirements

    Typically, you should expect to provide a 3.5% down payment for a single-family home purchased with an FHA loan. Those with lower credit scores will need to provide at least 10% upfront. Remember that the higher a down payment you can provide, the more likely you are to get great interest rates.

    Payment Assistance Programs in California

    Thankfully, California is ripe with down payment assistance programs and closing cost assistance groups. Here are some of the best programs available for FHA loan recipients.

    • MyHome Assistance Program

    • CalPlus Homebuyer Assistance Program

    • CalHFA Forgivable Equity Builder Loan

    • California Dream For All Shared Appreciation Loan

    • Golden Opportunities Down Payment Assistance Program

    • GSFA Platinum Program

    • Pathway to Homeownership Closing Cost Assistance

  • Mortgage Insurance

    FHA borrowers will need to pay a mortgage insurance premium, which functions much like the mortgage insurance that conventional mortgages require. In addition to the upfront premium that is part of your closing costs, you will also make an annual insurance payment, which is calculated as a percentage based on your loan-to-value (LTV) ratio.

  • FHA Loan Limits

    California FHA loan limits depend on the specific area and what type of property you’re buying, such as whether it’s a multifamily home or a single-family home.

    The loan amount you can access depends on the specific county where you’d like to purchase a property. Low-cost areas, such as Yuba County, have a limit of $498,257, but the limit for a single-family home may be as high as $1,149,825 in very expensive areas. Here are the California FHA loan limits for the major metro areas:

    • Riverside $644,000

    • Los Angeles $1,149,825

    • Napa $1,017,750

    • Sacramento $763,600

    • San Francisco $1,149,825

    • San Jose $1,149,825

    • Santa Cruz $1,149,825

    • Santa Barbara 838,350

    • San Luis Obispo $929,200

    • Salinas $920,000

    • Stockton $656,650

    • San Diego $1,006,250

How District Lending Can Help

Getting a mortgage should be exciting, not scary, which is why District Lending works hard to make the FHA loan process as simple as possible for every Californian. From your first quote to an FHA streamline refinance, we’re here for you through all stages of your homeownership process.

We’ll walk you through your options, including FHA loans, conventional loans, jumbo loans, and VA loans, so you can be sure you find the exact one for your specific needs. You’ll work with a qualified mortgage professional who will explain the FHA loan guidelines to you and help you find programs that assist with financing, such as down payment assistance funds.

While you’re here, look at our convenient mortgage calculator to get an idea of how much home you can afford in the Golden State, then get preapproved online within just a few hours. We’re excited to help you start California dreaming in a beautiful new home!

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Buy
Home Purchase
Why District
Read about all the benefits
Process overview
Simplified and easy to understand
Apply now
Start your application
Get a quote
See your rate with no commitment
Perks
Free refinance for 3 years
Refinance with no closing costs
No closing costs
Zero costs options, what it means
Realtor credits
Get .5% towards your closing costs
18 Day closing
2X more likely to get your offer accepted
Price match guarantee
We beat competitors’ rates by .125% or more
Rate defense
Never miss out on rates dropping
Refinance
Rates
About
Reviews
Hear from our customers
Contact
Answers within 2 business hours
Meet the crew
Our experts, mission, and values
Careers
Join us in making a difference
Learn
Blog
Our knowledge at your convenience
Mortgage secrets
Short videos with tips&tricks
Video library
A short description can be here
Calculator
Calculate your mortgage payment
Apply nowGet a quote