Learn about the requirements for an FHA Loan in San Diego

Securing an FHA home loan for your dream home in San Diego doesn’t have to be a hassle, no matter what your budget is like or what kind of house you have in mind.

An FHA home loan will likely be the best home loan option for you.

This government loan program is simple to qualify for and is eligible for most San Diegans looking to purchase a single family residence or a condo.

With a down payment as low as 3.5% and competitive interest rates, home-buyers can save money while still making the dream of owning a home in San Diego an affordable reality.

What are some of the FHA benefits?

  • Your down payment is as low as 3.5%.
  • There is no limit on borrower income, and there is also more flexibility when it comes to your credit score.
  • A higher debt-to-income ratio that might stand in your way with conventional financing is acceptable with an FHA loan in San Diego.
  • FHA loans usually have lower interest rates than conventional loans.
  • You may obtain an FHA loan not just for a home purchase but also for renovation, a cash-out refinance, rate and term refinance, or even a reverse mortgage.
  • If you have filed for bankruptcy, you can apply for an FHA loan with re-established credit. Chapter 7 requires a two year waiting period from the discharge date, a chapter 13 requires 12 months of payments.
  • If you have a foreclosure in the past or had a short sale, three years after the date of the foreclosure or short sale, you can be eligible for an FHA loan as long as you have re-established credit.

What can negatively affect your FHA loan eligibility?

  • No Credit History. It’s difficult to determine if you can pay bills on time without a credit history.
  • Bankruptcy. It does not disqualify a borrower from obtaining an FHA loan but will require a more in-depth credit review. For Chapter 7 bankruptcy, at least two years must have elapsed and have re-established credit.
  • Late Payments. It’s best to apply for an FHA loan when you have a solid 12 months of on-time payments for all financial obligations.
  • Foreclosure. Past foreclosures are not necessarily a roadblock to a new FHA home loan, but it depends on the circumstances.
  • Collections, Judgements, and Federal Debt – In general, FHA loan requires that judgments are resolved prior to or at closing. Collection accounts may be required to be paid off depending on the circumstances, and all Federal debt must be in good standing.

FHA Loans vs. Conventional In San Diego

FHA Loans in San Diego are a great option, but for borrowers who have higher credit scores in the 700s and lower debt to income ratios, a conventional loan with mortgage insurance is most likely a better option.

Here are a few reasons why:

  • With a conventional, the mortgage insurance payment can be removed once you achieve 20% equity.
  • Mortgage insurance on an FHA loan cannot be removed. It will remain on the loan for life. 
  • There is no funding fee required on a conventional loan. Funding fee on FHA is 1.75% and is rolled into the loan.

Read more about the differences: FHA vs. Conventional

What is the current FHA loan limit in San Diego?

FHA loan limits vary based on the number of living-units on the property and the county the property is located in.

San Diego’s current loan limit is

Update: The below loan limits are valid through 2023
  • Loan limit for 1 unit in San Diego is $977,500
  • 2 unit is $1,251,400
  • 3 unit is $1,512,650
  • and the loan limit for a 4 unit in San Diego is $1,685,850

These 2 to 4 unit properties can be purchased with an FHA loan as long as one of the units is owner occupied.

Properties with over 4 units are considered commercial and do not quality for regular FHA loans.

These loan limits signify the max loan amount not purchase price.

For example, the loan amount for a 1 unit in San Diego cannot exceed $977,500, after the FHA funding fee has been added, and the down payment deducted.

Loan limits can be verified by going to this site.

What if you want to go higher than $977,500 loan amount?

An FHA loan wouldn’t be an option. Any loan amount that is higher than the San Diego loan limits requires a different program called the jumbo loan.

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