FHA Loans in California

FHA Loan Limits in California (2025)

The FHA loan limit for all California counties is $1,209,750 for a single-family home, as set by the Federal Housing Finance Agency (FHFA). This is the maximum loan amount — not the purchase price. With 3.5% down, you can purchase a home up to approximately $1,253,626. For multi-unit properties, the limits are higher: $1,548,975 for duplexes, $1,872,225 for triplexes, and $2,326,875 for fourplexes. California has the highest FHA limits in the nation because every county qualifies as a high-cost area. These limits apply to all FHA purchase and refinance transactions originated in 2025.

FHA Mortgage Insurance Explained

FHA loans require two types of mortgage insurance, both mandated by HUD. The upfront mortgage insurance premium (UFMIP) is 1.75% of the loan amount, paid at closing or financed into the loan. On a $680,000 loan, this equals $11,900. The annual mortgage insurance premium (MIP) is 0.55% of the loan balance per year, paid monthly. On the same loan, this adds approximately $312 per month to the payment. For loans originated after June 3, 2013, with less than 10% down, MIP is required for the life of the loan — it does not cancel automatically like conventional PMI. Borrowers who put 10% or more down pay MIP for 11 years.

This permanent MIP is the primary reason many California borrowers refinance from FHA to conventional once they build 20% equity. If your home appreciates from $850,000 to $1,020,000 (a 20% gain), you can refinance into a conventional loan with no PMI, potentially saving $300-400 per month. In California's appreciating markets, this equity threshold is often reached within three to five years of purchase.

FHA Appraisal Requirements in California

FHA appraisals evaluate both market value and minimum property standards — they are more thorough than conventional appraisals. The appraiser checks for health and safety issues including peeling paint on homes built before 1978 (lead paint risk), missing handrails on stairs and elevated walkways, non-functional mechanical systems (HVAC, plumbing, electrical), evidence of water damage, pest infestation, or structural compromise, and inadequate roofing with less than two years of remaining useful life. In California specifically, water heater strapping is required by state code and is checked during FHA appraisals.

If the appraisal identifies issues, the seller must complete repairs before closing — or the deal can include an escrow holdback where funds are set aside for post-closing repairs. Common FHA repair requirements in California include exterior paint touch-up on pre-1978 homes, installation of smoke and carbon monoxide detectors per California code, water heater strapping, and handrail installation. These repairs are typically minor and cost $500-2,000 total. The FHA appraisal is valid for 120 days — if the transaction doesn't close within that window, a new appraisal or an appraisal update is required.

FHA Down Payment Sources

FHA is more flexible than conventional loans regarding the source of your down payment. The entire 3.5% down payment can come from a gift from a family member — parent, grandparent, sibling, spouse, or domestic partner. The donor must provide a signed gift letter stating the funds are a gift with no repayment expected, along with bank statements showing their ability to provide the gift. FHA also accepts down payment funds from employers, government agencies, charitable organizations, and down payment assistance programs like CalHFA.

CalHFA's MyHome Assistance Program provides up to 3.5% of the purchase price as a deferred-payment second mortgage that can cover the entire FHA down payment. Combined with seller concessions of up to 6% of the purchase price for closing costs, FHA borrowers can purchase a California home with minimal out-of-pocket expense. A $750,000 purchase with CalHFA assistance requires approximately $5,000-8,000 in total out-of-pocket costs after the down payment assistance and seller concessions are applied.

FHA vs. Conventional: Which Is Better in California?

The answer depends on your credit score, down payment, and how long you plan to keep the loan. FHA wins when your credit score is below 700 — FHA rates are less sensitive to credit score than conventional rates, so borrowers with 620-680 credit scores often get significantly better FHA rates. FHA also wins when you have less than 5% for a down payment, since conventional 3% down programs have stricter income limits and higher PMI rates at lower credit scores.

Conventional wins when your credit score is 720 or above and you have at least 5% down. At this profile, conventional rates are competitive with FHA, and conventional PMI is both cheaper and cancellable — unlike FHA's permanent MIP. Over a 10-year period, a 740-credit borrower saves approximately $35,000-50,000 by choosing conventional over FHA on a $680,000 California loan, primarily from PMI cancellation at 20% equity. A licensed broker can run both scenarios side by side to show the exact monthly and lifetime cost difference for your specific situation.

Last updated: July 2026. Sources: U.S. Department of Housing and Urban Development (HUD) FHA program guidelines. Federal Housing Finance Agency (FHFA) 2025 loan limits. CalHFA MyHome Assistance Program documentation. California Building Code requirements.

Frequently Asked Questions — FHA Loans