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in Downey, CA
Both FHA and USDA loans offer low-barrier paths to homeownership in Downey, but they serve different borrower profiles. FHA works anywhere in the city with just 3.5% down, while USDA requires zero down but limits eligibility by location and income.
Most Downey properties won't qualify for USDA financing because the city is considered urban. FHA becomes the default government option for buyers who need flexible approval terms but don't have a large down payment saved.
FHA loans require 3.5% down with credit scores as low as 580. You pay both upfront mortgage insurance (1.75% of loan amount) and monthly MI premiums for the life of most loans.
There's no income cap, so higher earners can use FHA if they prefer the low down payment option. Property must meet FHA appraisal standards, which can slow deals on fixer-uppers but generally isn't an issue in Downey's housing stock.
Debt-to-income ratios can stretch to 50% with compensating factors. That means you can carry more monthly debt than conventional loans typically allow, which helps buyers with car payments or student loans.
USDA loans offer zero down payment financing, but the property must be in a USDA-eligible rural area. Downey itself is classified as urban and ineligible, though some surrounding Los Angeles County areas do qualify.
Income limits apply based on household size and county median income. You can't exceed 115% of the area median, which disqualifies many dual-income households even if they find an eligible property.
USDA charges a 1% upfront guarantee fee and annual fees of 0.35%, lower than FHA's ongoing costs. Processing takes longer than FHA because USDA must review and approve each loan twice.
Location eligibility is the biggest divider. FHA works on any Downey property, while USDA won't approve loans in the city proper due to urban classification.
Down payment requirements split 3.5% for FHA versus 0% for USDA. But USDA's income limits and geographic restrictions mean most Downey buyers can't access that zero-down benefit anyway.
Both programs accept credit scores in the 580-620 range, though individual lenders overlay stricter minimums. FHA typically closes faster because it doesn't require the second-stage USDA underwriting approval.
If you're buying in Downey proper, FHA is your government loan option. USDA won't approve properties in the city's urban-classified boundaries.
USDA only makes sense if you're willing to look at eligible areas outside Downey and your household income falls below the cap. Even then, you need to weigh zero down against longer processing times and limited inventory in qualifying zones.
For most Downey buyers using government financing, FHA delivers faster closes and wider property selection. Save 3.5% for down payment and you're competitive on nearly any home in the city.
No. Downey is classified as an urban area and ineligible for USDA financing. You'd need to look at outlying Los Angeles County areas that meet USDA's rural definition.
USDA charges 0.35% annually versus FHA's 0.55-0.80%. But FHA's upfront fee is 1.75% compared to USDA's 1%, so long-term costs depend on how long you keep the loan.
Yes. Both accept scores as low as 580, though some lenders require 620+ as an overlay. FHA has more lender flexibility because it's a more common program.
FHA typically closes in 30-40 days. USDA adds 10-15 days for the second-stage government review, pushing timelines to 45-60 days in most cases.
No. FHA has no income limits regardless of household earnings. USDA caps income at 115% of area median, which eliminates many moderate-income dual earners.