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in Shafter, CA
Shafter homebuyers face an important choice: conventional or FHA financing. Each loan type serves different borrower needs, from down payment requirements to credit standards.
Understanding these differences helps you pick the right mortgage for your Kern County home purchase. The choice affects your upfront costs, monthly payments, and long-term savings.
Both options remain popular in Shafter's housing market. Your income, credit score, and available savings determine which path makes the most sense.
Conventional loans don't carry government insurance, which means lenders set their own standards. This typically requires stronger credit and larger down payments than government-backed options.
Borrowers with 20% down avoid private mortgage insurance entirely. Those who put down less pay PMI until reaching 20% equity, but can request cancellation at that point.
These mortgages offer competitive rates for qualified buyers. They work well for purchase prices above FHA limits and provide more property type flexibility.
FHA loans help buyers with limited savings enter homeownership. Down payments start at just 3.5% for borrowers with credit scores of 580 or higher.
The Federal Housing Administration insures these mortgages, reducing lender risk. This insurance requires both an upfront premium and ongoing monthly payments throughout the loan life.
Credit requirements prove more forgiving than conventional standards. FHA accepts lower scores and higher debt-to-income ratios, making homeownership accessible to more Shafter residents.
Down payment separates these options most visibly. Conventional loans typically require 5-20%, while FHA accepts 3.5% with qualifying credit scores.
Mortgage insurance works differently between the two. FHA charges 1.75% upfront plus monthly premiums for the loan's duration. Conventional PMI costs less monthly but applies only when putting down under 20%.
Credit score thresholds vary significantly. Conventional lenders prefer 620 or higher, while FHA approves scores as low as 580 for minimum down payments.
Property standards differ too. FHA requires stricter inspections and appraisals, which can complicate purchases of fixer-uppers or unique properties in Shafter.
Choose FHA if you have limited savings or credit scores between 580-680. The lower down payment helps you buy sooner, though you'll pay more in insurance over time.
Pick conventional when your credit exceeds 680 and you can afford 10-20% down. You'll save thousands in mortgage insurance and gain more property options in Kern County.
First-time buyers often start with FHA, then refinance to conventional after building equity. This strategy gets you into homeownership quickly while positioning you for future savings.
Run the numbers both ways with current rates. Sometimes the monthly payment difference is smaller than expected, making the lower upfront cost of FHA particularly attractive.
Yes, refinancing from FHA to conventional becomes possible once you build 20% equity. This eliminates mortgage insurance and often lowers your monthly payment significantly.
Conventional loans typically close slightly faster due to simpler appraisal requirements. FHA properties need more detailed inspections, which can add 1-2 weeks to the timeline.
Sellers often favor conventional offers because fewer properties fail FHA inspections. However, a strong FHA offer with good terms still competes effectively in Shafter's market.
Scores of 740 or higher unlock the lowest conventional rates. The difference between 680 and 740 can mean 0.25-0.5% higher rates, affecting your monthly payment.
No, FHA loans require owner occupancy. You must live in the property as your primary residence for at least one year after purchase.