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in Clearlake, CA
Clearlake buyers face a choice between conventional and FHA financing. Each serves different credit profiles and down payment budgets.
Conventional loans reward strong credit with lower costs. FHA loans open doors for buyers with limited savings or past credit issues.
Your choice affects upfront costs, monthly payments, and how much home you can afford. Most Lake County buyers qualify for one but not both.
Conventional loans require no government backing. Lenders set their own standards, typically 620 minimum credit and 3-5% down.
You pay private mortgage insurance only until you hit 20% equity. That saves thousands over the loan life compared to FHA.
Rates beat FHA when your credit tops 680. Lenders price conventional loans on a sliding scale—better credit means better terms.
Debt-to-income limits stretch to 50% with strong compensating factors. You can borrow more if your credit and reserves look solid.
FHA loans accept 580 credit with 3.5% down. Drop to 500 credit and you need 10% down but can still get approved.
You pay 1.75% upfront mortgage insurance plus 0.55-0.85% annual premiums. That insurance never cancels on loans over 90% LTV.
Rates run slightly higher than conventional but stay consistent across credit tiers. A 620 score gets nearly the same rate as 740.
Sellers can contribute up to 6% toward your closing costs. That flexibility helps when cash is tight beyond the down payment.
Credit requirements split these loans cleanly. Conventional starts at 620 but really shines above 700. FHA works for 580-680 credit ranges.
Down payment minimums look similar—3% conventional vs 3.5% FHA. But FHA lets sellers pay more of your closing costs, reducing cash needed.
Mortgage insurance creates the biggest cost gap. Conventional PMI cancels at 20% equity. FHA insurance sticks for the loan life on most purchases.
Property standards differ significantly. FHA requires stricter inspections and won't accept some Clearlake fixers that conventional lenders approve.
Choose FHA if your credit sits below 680 or you're putting down less than 10%. The rate advantage outweighs the insurance cost short-term.
Go conventional with 700+ credit and 5%+ down. You'll save $200-400 monthly once PMI drops and pay less interest upfront.
Plan to refinance out of FHA within 3-5 years if you start there. That timeline lets you build equity then switch to conventional terms.
Consider your property too. Clearlake has older housing stock that may not pass FHA inspection without repairs. Conventional offers more flexibility.
Only if repairs are cosmetic. FHA requires working utilities, sound structure, and safe conditions that many Clearlake fixers don't meet without work.
Around 700 credit with 5-10% down. Lower rates offset higher PMI until you hit 20% equity and drop mortgage insurance entirely.
No. Both allow 50% debt ratios in Lake County. FHA actually stretches further on borderline income because rates don't penalize lower credit.
Not if you put down less than 10%. The only exit is refinancing to conventional once you build 20% equity.
Conventional by 5-7 days typically. FHA's required property inspection and appraisal review add time to the approval process.