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in Chico, CA
Chico homebuyers often qualify for two government-backed loan programs that make homeownership more affordable. FHA loans require just 3.5% down, while USDA loans offer zero down payment options for eligible properties in Butte County.
Both programs help buyers who might struggle with conventional loan requirements. The right choice depends on where you want to live, your income level, and how much you've saved for a down payment.
FHA loans work anywhere in Chico, from downtown to the outskirts. You can buy a home with as little as 3.5% down if your credit score is 580 or higher. With a score between 500-579, you'll need 10% down.
These government-insured mortgages allow higher debt-to-income ratios than conventional loans. You'll pay both upfront and monthly mortgage insurance premiums, which protect the lender if you default.
FHA loans accept gift funds for your down payment and closing costs. This makes them popular with first-time buyers who have family support but limited savings.
USDA loans require no down payment for eligible properties in approved areas of Butte County. Many Chico neighborhoods qualify, particularly in suburban and developing areas outside the urban core.
Your household income must fall within USDA limits for the area. These limits vary based on family size and county location. The program targets low to moderate-income buyers in less densely populated areas.
USDA loans charge an upfront guarantee fee and annual fee similar to FHA mortgage insurance. You'll need a credit score of at least 640 for streamlined processing, though manual underwriting accepts lower scores.
The biggest difference is down payment: FHA needs 3.5% minimum while USDA requires nothing upfront. However, USDA limits where you can buy and caps your income, while FHA has no location or income restrictions in Chico.
USDA typically offers slightly lower interest rates than FHA. Rates vary by borrower profile and market conditions. Both programs require mortgage insurance, but the structure differs between them.
FHA works for any property type including condos and multi-family homes up to four units. USDA only finances single-family primary residences in eligible areas, which excludes investment properties and some urban locations.
Choose FHA if you want flexibility in where you buy or if your income exceeds USDA limits. It's ideal when you have some down payment saved and need to close quickly without property eligibility delays.
USDA makes sense when you want zero down payment and qualify income-wise. Check property eligibility first since not all Chico areas qualify. The income limits reset annually, so verify current numbers before assuming you're over the threshold.
Both programs help buyers who can't meet conventional loan standards. Working with a local Butte County lender ensures you understand which areas qualify for USDA and how both programs compare with your specific financial situation.
No, only properties in USDA-designated eligible areas qualify. Many suburban Chico neighborhoods qualify, but urban core properties typically don't. Check the USDA eligibility map before house hunting.
USDA often has lower rates and no down payment, potentially reducing monthly costs. However, both charge mortgage insurance premiums. Your specific rate depends on credit score, income, and property details.
Neither program requires you to be a first-time buyer. FHA has no buyer history restrictions. USDA requires only that you don't own adequate housing elsewhere.
USDA sets maximum household income based on county median income and family size. Butte County limits change annually. Income includes all household members, not just borrowers on the loan.
Yes, you can refinance between programs if you meet current eligibility requirements. Many borrowers refinance from FHA to conventional once they reach 20% equity to eliminate mortgage insurance.