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in Lakeport, CA
Lakeport buyers choosing between conventional and FHA loans face a straightforward tradeoff. FHA loans allow lower credit scores and smaller down payments, while conventional loans offer better rates and no upfront mortgage insurance for qualified borrowers.
Most first-time buyers in Lake County start with FHA, then refinance to conventional after building equity. That works, but it costs you thousands in extra interest and insurance premiums over those first few years.
Conventional loans require 620 credit minimum and 3% down for owner-occupied properties. Your rate drops substantially at 740+ credit, and you avoid mortgage insurance entirely with 20% down.
Lake County properties need standard appraisals, but conventional underwriting moves faster than FHA. Sellers prefer conventional offers because they close reliably without government inspection requirements that kill deals.
FHA loans accept 580 credit scores with 3.5% down, or 500-579 credit with 10% down. You pay 1.75% upfront mortgage insurance plus 0.55%-0.85% annual premiums that never drop off unless you refinance.
FHA appraisers flag property issues conventional lenders ignore—peeling paint, roof condition, water heaters. These requirements kill about 15% of Lakeport deals when sellers refuse repairs on older homes near Clear Lake.
Credit score creates the biggest split. FHA approves 580 scores that conventional lenders automatically decline. But that flexibility costs you—FHA rates run 0.25%-0.50% higher, and mortgage insurance adds another $150-$300 monthly on typical Lake County purchases.
Down payment flexibility matters less than buyers think. Both programs offer 3-3.5% down options. The real difference shows up in total costs—FHA's upfront insurance fee adds $3,500-$5,000 to your loan balance immediately.
Choose FHA if your credit sits between 580-660 or you're stretching to buy with minimal savings. The insurance costs hurt, but FHA gets you into a home now rather than waiting years to improve your credit profile.
Go conventional if you score 680+ and can manage 5% down. You'll save $200-$400 monthly compared to FHA on the same Lakeport property. Even at 3% down with PMI, conventional costs less than FHA over five years for borrowers with decent credit.
Yes, most borrowers refinance to conventional after reaching 20% equity and 680+ credit. You'll eliminate mortgage insurance and reduce your rate, typically saving $250-$400 monthly.
Conventional handles older properties better. FHA appraisers require repairs that Lake County sellers often refuse, killing deals on homes near the waterfront that need minor work.
Conventional closes 5-7 days faster on average. FHA appraisals take longer and often require re-inspections after repairs, adding weeks to your timeline.
You pay 1.75% upfront plus 0.55%-0.85% annually. On a $350,000 Lakeport home, that's $6,125 upfront and $160-$248 monthly that never drops off.
Some will, especially on older homes. Sellers know FHA appraisals kill 10-15% of deals with repair requirements that conventional loans ignore completely.