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in Bakersfield, CA
Bakersfield homebuyers face a key decision: conventional or FHA financing. Both loan types serve different needs and financial situations.
Your credit score, down payment savings, and long-term plans determine which option costs less. Understanding the differences helps you choose wisely.
Most Bakersfield buyers qualify for one or both programs. The right choice depends on your specific financial profile and homeownership goals.
Conventional loans offer traditional mortgage financing without government backing. Lenders set their own guidelines, typically requiring stronger credit and larger down payments.
You can put down as little as 3% with conventional financing. Private mortgage insurance (PMI) applies when you put down less than 20%, but you can cancel it once you reach 20% equity.
These mortgages work well for borrowers with good credit scores and stable income. Rates vary by borrower profile and market conditions, but qualified buyers often get competitive terms.
FHA loans come insured by the Federal Housing Administration. This government backing lets lenders accept lower credit scores and smaller down payments than conventional options.
You can put down just 3.5% with a credit score as low as 580. FHA requires both upfront mortgage insurance (1.75% of the loan amount) and annual premiums that last the loan's life in most cases.
These mortgages help first-time buyers and those with credit challenges enter homeownership. The lower barriers to entry make FHA popular among Bakersfield buyers building their financial foundation.
Credit requirements separate these programs most clearly. Conventional loans typically need scores of 620 or higher, while FHA accepts scores down to 580 with 3.5% down.
Mortgage insurance works differently between the two. Conventional PMI disappears when you reach 20% equity. FHA insurance stays for the loan's life if you put down less than 10%.
Down payment flexibility varies too. Both allow low down payments, but FHA's 3.5% minimum beats conventional's 3% only if your credit score falls below conventional standards.
Loan limits affect your buying power. Conventional conforming loans top out at $806,500 in Kern County for 2024. FHA limits reach $498,257, restricting options for higher-priced properties.
Choose FHA if your credit score sits below 620 or you're building credit history. The lower requirements and seller concessions help buyers who need flexible qualification standards.
Pick conventional if you have good credit and plan to stay long-term. You'll pay less over time because PMI cancels, and higher loan limits give you more buying power in Bakersfield's market.
Run the numbers both ways before deciding. A borrower with a 640 credit score might pay less monthly with FHA but more over 30 years due to permanent mortgage insurance.
Your down payment amount matters too. If you're putting down 10% or more, conventional typically costs less overall despite similar monthly payments at first.
Yes, you can refinance from FHA to conventional once you build 20% equity and improve your credit. This eliminates permanent mortgage insurance and reduces monthly costs.
Rates vary by borrower profile and market conditions. Conventional often offers lower rates for strong credit, while FHA may be competitive for lower credit scores.
Both work throughout Bakersfield. FHA has stricter property condition requirements, so some fixer-uppers may only qualify for conventional financing.
Conventional PMI costs 0.3-1.5% annually and cancels at 20% equity. FHA charges 1.75% upfront plus 0.45-1.05% annually for the loan's life in most cases.
FHA often needs less cash due to 3.5% down and seller concessions up to 6%. Conventional requires 3% down minimum but limits seller help to 3% with low down payments.