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in Covina, CA
Covina buyers typically face a choice between conventional and FHA financing. Each loan type serves different borrower profiles, and the right pick depends on your down payment savings and credit history.
FHA loans dominate with first-time buyers who have limited cash. Conventional loans appeal to buyers with stronger credit who want lower monthly costs long-term.
Conventional loans are not government-backed, which means lenders set stricter standards. You'll need 620 minimum credit for most programs, though some lenders go to 580 for special cases.
Put down 20% and you skip mortgage insurance entirely. Below 20% down, you'll pay PMI that drops off once you hit 20% equity—unlike FHA's permanent insurance on loans over 96.5% LTV.
Conventional works best for buyers with solid credit and either 20% down or plans to refinance out of PMI quickly. Rates often beat FHA for borrowers above 740 credit.
FHA loans carry federal insurance, letting lenders approve buyers with 580 credit and just 3.5% down. You can even qualify at 500 credit with 10% down, though few lenders go that low.
You'll pay 1.75% upfront mortgage insurance premium, typically rolled into the loan. Monthly MIP runs 0.55% to 0.85% annually and stays for the loan's life if you put down less than 10%.
FHA makes sense when your credit is under 680 or you're stretching to buy with minimal savings. Sellers in Covina often prefer conventional offers, so expect some extra negotiation.
Credit standards separate these loans sharply. FHA approves 580 scores routinely while conventional typically needs 620 minimum, with best pricing reserved for 740+.
Mortgage insurance costs diverge after a few years. Conventional PMI drops off with 20% equity, but FHA MIP on 96.5% loans never cancels unless you refinance.
Down payment flexibility favors FHA at 3.5% minimum, though conventional matches it with 3% programs for qualified first-timers. The real difference shows up in total insurance costs over time.
Choose FHA if your credit sits between 580 and 680, or you're putting down less than 10% and plan to sell or refinance within five years. The permanent insurance hurts less on shorter timelines.
Pick conventional if you're above 680 credit or can put 20% down. Even at 5% down, conventional often costs less monthly than FHA once you factor in the upfront premium and higher MIP rates.
Run the numbers both ways. I've seen Covina buyers save $150 monthly going conventional at 10% down versus FHA, purely from insurance differences.
Yes, refinancing to conventional once you hit 20% equity removes FHA's permanent mortgage insurance. You'll need 620+ credit to qualify for the refinance.
Conventional typically closes 3-5 days faster since there's no FHA appraisal review period. Sellers often favor conventional offers for this reason.
Yes, both accept gift funds from family. FHA allows 100% of down payment as gift, conventional requires 5% borrower funds on investment properties only.
FHA requires 3.5% down with 580 credit. Conventional starts at 3% for qualified first-time buyers through special programs.
You pay 1.75% upfront plus 0.55%-0.85% annually. On a $500k loan, that's $8,750 at closing and $275-$350 monthly for the loan's life.