If you're thinking about buying a home in Santa Clarita, CA, you’ve probably come across the term “FHA loan.” But what exactly is an FHA loan, and how can it help you achieve homeownership? An FHA loan is a mortgage insured by the Federal Housing Administration FHA, a government agency within the Department of Housing and Urban Development (HUD).
The purpose of FHA loans are to make homeownership more accessible and affordable for low- and moderate-income borrowers. FHA loans require a minimum down payment of 3.5% and have less stringent credit requirements than conventional loans, which make them a popular choice for first-time homebuyers.
However, FHA loans also require borrowers to pay a mortgage insurance premium of 1.75% that is financed into the balance of the mortgage upfront - and mortgage insurance premiums (MIP) last for the life of the loan - which can increase the overall cost of the mortgage.
Whether you’re a first-time homebuyer or just looking for a more accessible mortgage option, an FHA loan could be the perfect solution for you.
Why Should I Get an FHA Mortgage Loan in Santa Clarita?
Santa Clarita is a thriving city with tons of beautiful neighborhoods, excellent schools, and a strong real estate market. However, home prices are on the rise. And coming up with a large down payment can be a challenge. An FHA loan offers a way for many buyers to enter the market with a more manageable financial commitment.
How Does an FHA Loan Work? What Are FHA Loan Requirements?
To qualify for an FHA loan, you’ll need to meet specific criteria:
1. Credit Score
A minimum credit score of 580 allows you to qualify for a 3.5% down payment.
If your score is between 500-579, you may still qualify, but you’ll need to make at least a 10% down payment.
2. Down Payment
One of the biggest advantages of an FHA loan is the low down payment requirement—just 3.5% if you meet the credit score criteria.
A lower down payment makes homeownership much more accessible through FHA financing, especially for first-time homebuyers who may not have substantial savings, but who can make the necessary monthly payments.
3. Debt-to-Income (DTI) Ratio
Most lenders require a DTI ratio of 43% or lower. Your total monthly debt payments (including your mortgage) should not exceed 43% of the gross monthly income for FHA borrowers.
4. Mortgage Insurance
FHA loans require mortgage insurance premiums (MIP) to protect the lender in case of default.
There are two types of MIP:
Upfront MIP: 1.75% of the loan amount, paid at closing.
Annual MIP: Added to your monthly mortgage payment (typically 0.45%-1.05% of the loan amount per year).
5. FHA Home Loan Property Requirements
The home must be your primary residence.
It must meet FHA minimum property standards, ensuring it’s safe, livable, and structurally sound.
FHA Loan Limits in Santa Clarita, CA
Since home prices vary across the country, the Federal Housing Administration sets loan limits based on local median home values. As of 2024, the FHA loan limit for a single-family home in Los Angeles County (which includes Santa Clarita) was $1,149,825. This allows Santa Clarita home buyers to access financing for higher-priced homes while still benefiting from the FHA insured loan flexible requirements.
FHA Loans vs. Conventional Mortgage Loans: What’s the Difference?
If you're debating between FHA loan products and a conventional loan from private lenders, here’s how they compare:
Feature | FHA Loan | Conventional Loan |
Credit Score | 580+ for 3.5% down | 620+ typically required |
Down Payment | 3.5% minimum | 3%-20% depending on lender |
Mortgage Insurance | Required (MIP) | Required if <20% down (PMI) |
Loan Limits | Set by FHA based on area | Higher limits available |
Property Type | Primary residence only | Can be primary, secondary, or investment property |
Pros and Cons of FHA Loans
Pros:
Lower credit score requirements make it easier to qualify.
Smaller down payment means you don’t need to save as much upfront.
More lenient debt-to-income ratio requirements provide flexibility.
Competitive interest rates can make homeownership more affordable.
Cons:
Mortgage insurance is required for the life of the loan unless you refinance to a conventional loan.
Loan limits may restrict your options in higher-priced markets.
Property condition requirements can limit eligible homes.
How to Apply for an FHA Loan in Santa Clarita
If you’re ready to buy a home and are interested in an FHA loan, here’s how to apply:
Check Your Credit Score – Make sure you meet the minimum requirements.
Determine Your Budget – Consider the FHA loan limits in Santa Clarita.
Find a Lender – Work with an FHA-approved lender to get pre-approved. The team at Peregrine Financial are FHA Loan experts who can help you navigate the process.
Gather Your Documents – You’ll need proof of income, employment history, and bank statements. Reach out to us
Start House Hunting – Once pre-approved, work with a real estate agent to find your dream home.
Submit Your Application – Work with your lender to finalize the loan process.
Close on Your Home – Once approved, sign your final paperwork and get your keys!
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