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in McFarland, CA
McFarland homebuyers often qualify for two popular government-backed loan programs: FHA and USDA. Both options help buyers with limited savings or moderate credit purchase homes with favorable terms.
Understanding the key differences between these programs helps you choose the right path for your situation. Each loan type serves different borrower needs in Kern County's housing market.
FHA loans require just 3.5% down for borrowers with credit scores of 580 or higher. The Federal Housing Administration insures these mortgages, allowing lenders to offer competitive rates and flexible qualification standards.
These loans work anywhere in McFarland and throughout California. Borrowers pay both an upfront mortgage insurance premium and monthly mortgage insurance, which protects the lender if you default.
FHA programs accept higher debt-to-income ratios than conventional loans. This flexibility helps buyers who have solid income but carry student loans, car payments, or other monthly obligations.
USDA loans require zero down payment for eligible rural and suburban properties. The United States Department of Agriculture backs these mortgages to support homeownership in less densely populated areas.
McFarland qualifies as a USDA-eligible area, meaning buyers can purchase here with no money down. However, household income cannot exceed USDA limits for Kern County, which vary by family size.
These loans charge a smaller upfront guarantee fee than FHA and lower monthly mortgage insurance. The property must serve as your primary residence, and you'll need decent credit to qualify.
The biggest contrast is down payment: FHA requires 3.5% while USDA requires nothing. For a home priced at $300,000, that means $10,500 down with FHA versus zero with USDA.
USDA loans restrict both location and income, while FHA has no such limits. You can earn any amount and buy anywhere with FHA, but USDA requires you to stay within income caps and eligible zones.
Mortgage insurance costs differ significantly. USDA charges a 1% upfront fee and 0.35% annual premium, while FHA charges 1.75% upfront and 0.55% to 0.85% annually depending on loan terms. Rates vary by borrower profile and market conditions.
Choose USDA if you qualify based on income limits and want to avoid a down payment entirely. This program saves you thousands upfront and charges lower ongoing insurance fees.
Pick FHA if your household income exceeds USDA limits or you need maximum flexibility. FHA works regardless of where you want to live or how much you earn, making it the more versatile option.
Many McFarland buyers start by checking USDA eligibility first. If income or property location disqualifies you, FHA provides an excellent backup with its own advantages and accessible requirements.
Yes, McFarland qualifies as a USDA-eligible area. However, you must also meet household income limits for Kern County, which vary based on family size.
USDA typically costs less monthly due to lower mortgage insurance and no down payment. FHA payments include higher insurance premiums but offer more flexibility.
FHA accepts scores as low as 580 for 3.5% down. USDA generally requires 640 minimum, though some lenders may accept lower scores with compensating factors.
FHA allows gifts from family or approved sources for your 3.5% down payment. USDA requires no down payment, so gift funds are not needed.
You cannot refinance FHA to USDA. However, you can refinance your USDA loan to FHA or conventional options as your situation changes over time.