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in Los Angeles, CA
Los Angeles prices force most buyers to make a hard choice between conventional and FHA financing. Your credit score and down payment size will determine which path works.
FHA lets you in with 3.5% down and a 580 credit score. Conventional demands more upfront but costs less monthly if you put down 20%.
Conventional loans come from private lenders without government backing. You can put down as little as 3% as a first-time buyer, but you'll pay PMI until you hit 20% equity.
Once you reach 20% equity, PMI drops off automatically. That's the big advantage over FHA, where mortgage insurance sticks for the loan's life on most deals.
You need a 620 credit score minimum, though 740+ gets you the best pricing. Debt-to-income can't exceed 50% in most cases.
FHA loans are insured by the Federal Housing Administration. You can qualify with a 580 credit score and just 3.5% down, which opens doors for buyers still building credit.
The trade-off hits you monthly. You pay an upfront mortgage insurance premium of 1.75%, then annual premiums that rarely drop off. On a 30-year loan with under 10% down, that insurance runs for life.
FHA caps your loan at $766,550 in Los Angeles County for 2024. That limit cuts out most single-family homes in desirable LA neighborhoods.
Credit requirements split these loans. FHA approves 580 scores that conventional lenders reject outright. But conventional rewards strong credit with better rates and removable PMI.
Mortgage insurance works differently. Conventional PMI costs 0.3% to 1.5% annually and cancels at 20% equity. FHA charges 0.55% to 0.85% annually and almost never drops off.
Loan limits matter in Los Angeles. FHA caps at $766,550 while conventional goes to $766,550 for conforming loans or higher for jumbo. Most LA properties push you toward conventional or jumbo financing.
Pick FHA if your credit sits below 640 or you need the lower down payment to qualify. It's the only realistic option for many first-time buyers with limited savings and rebuilding credit.
Go conventional if you have 620+ credit and can handle a slightly larger down payment. You'll pay less over time once PMI drops, and you won't fight FHA's loan limits on pricier LA properties.
Run the math on total cost. FHA might offer lower rates, but lifetime mortgage insurance often wipes out that advantage after year five. A sharp broker will show you the break-even point.
Yes, you can refinance out of FHA once you hit 20% equity and your credit improves. That kills the lifetime mortgage insurance problem.
Conventional typically closes quicker because it skips FHA's appraisal requirements for property condition. Expect 25-30 days versus 35-40 for FHA.
Most LA sellers prefer conventional because the appraisal is less strict. FHA appraisers flag repairs that can kill deals or force price cuts.
Put down 20% if you can to avoid PMI entirely. Otherwise, 5-10% keeps your payment manageable while building equity faster than 3%.
Only if the building is FHA-approved. Many LA condo complexes don't qualify, which forces you to conventional financing.