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in Chico, CA
Chico buyers generally land on one of two loan types: conventional or FHA. Your credit score and down payment usually decide which works better.
HousingWire flagged a drop in mortgage applications as the 30-year fixed hit 6.57% — picking the right loan type matters more when rates are elevated. Rates vary by borrower profile and market conditions.
Conventional loans are not government-backed. Lenders take on more risk, so they require stronger credit and bigger down payments.
The upside: no upfront mortgage insurance premium. With 20% down, you avoid private mortgage insurance (PMI) entirely.
FHA loans are backed by the Federal Housing Administration. That backing lets lenders approve borrowers with lower credit scores.
You can get in with 3.5% down at a 580 credit score. Drop to 500-579 and you need 10% down — but approval is still possible.
Local decision guide
Use this comparison to weigh Conventional Loans and FHA Loans through local payment fit, eligibility, documentation, and timing before choosing a path in Chico.
Chico buyers generally land on one of two loan types: conventional or FHA. Your credit score and down payment usually decide which works better.
HousingWire flagged a drop in mortgage applications as the 30-year fixed hit 6.57% — picking the right loan type matters more when rates are elevated. Rates vary by borrower profile and market conditions.
Conventional loans are not government-backed. Lenders take on more risk, so they require stronger credit and bigger down payments.
The biggest difference is mortgage insurance. FHA charges an upfront premium plus annual premiums — often for the entire loan term. Conventional PMI drops off at 20% equity.
Conventional loans also have higher loan limits in Butte County. FHA limits are lower, which matters less in Chico than in pricier Bay Area markets.
If your credit is below 620, FHA is likely your only path. Above 700 with at least 5% down, conventional usually costs less over time.
Chico's price range tends to stay within FHA limits, so the loan cap rarely blocks buyers here. The insurance cost difference is what really drives the choice.
Yes. Chico home prices generally fall within Butte County's FHA loan limits. Check current limits before assuming — they adjust annually.
Both go as low as 3-3.5% down. FHA requires 3.5% at 580+ credit. Conventional can go to 3% for qualifying first-time buyers.
On most FHA loans, annual MIP stays for the life of the loan. That's the main cost reason to refinance into conventional once you build equity.
Most lenders require at least 620. Better rates typically start at 740. Below 620, FHA is the more realistic option.
FHA is more flexible on credit and debt-to-income ratio. Conventional requires stronger financials but costs less long-term for qualified borrowers.
Yes — refinancing into conventional once you hit 20% equity removes mortgage insurance entirely. Many Chico buyers start FHA and refinance later.