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in Lynwood, CA
Most Lynwood buyers choose between conventional and FHA financing. Both get you into a home, but they work differently on down payment, credit, and ongoing costs.
Conventional loans reward strong credit with lower rates and no mortgage insurance after 20% equity. FHA accepts lower scores but charges insurance for the loan's life.
The right choice depends on your credit score, down payment size, and how long you plan to keep the property. Let's break down what matters.
Conventional loans offer the cleanest long-term cost structure. You avoid mortgage insurance entirely with 20% down, or drop PMI once you hit 20% equity.
Most lenders want 620+ credit and steady income. Down payments start at 3% for first-time buyers, 5% for repeat buyers.
Rates beat FHA if your credit is 680 or higher. Debt-to-income can stretch to 50% with strong compensating factors like reserves or high credit scores.
FHA loans accept 580 credit scores with 3.5% down. You can qualify at 500 with 10% down, though few lenders go that low.
Upfront mortgage insurance costs 1.75% of the loan amount, financed into your balance. Monthly insurance runs 0.55% to 0.85% annually depending on loan size and down payment.
FHA insurance never drops off unless you refinance. That's the tradeoff for easier approval—higher ongoing costs even after you build equity.
Credit score is the biggest split. Below 640, FHA usually costs less upfront despite insurance. Above 680, conventional wins on rate and total cost.
Mortgage insurance works opposite ways. Conventional PMI disappears at 20% equity. FHA insurance stays forever unless you refinance to conventional later.
Down payment flexibility favors FHA slightly—gift funds are easier, seller concessions go higher, and 3.5% works for everyone. Conventional caps first-timers at 3% but requires 5% for repeat buyers.
Choose FHA if your credit is below 640 or you have past issues like bankruptcy or foreclosure. The insurance cost hurts, but you get approved and start building equity now.
Go conventional with 680+ credit and stable income. You pay less upfront, get a better rate, and drop insurance once you hit 20% equity.
Planning to sell or refinance within five years? FHA works fine despite the insurance. Keeping the loan longer? Conventional saves thousands in avoided insurance premiums.
Conventional typically requires 620 minimum. FHA accepts 580 with 3.5% down, sometimes 500 with 10% down through select lenders.
No, FHA insurance lasts the loan's full term. You must refinance to conventional to drop it after reaching 20% equity.
Conventional costs less upfront—no 1.75% insurance fee. FHA charges that fee but accepts lower credit, so total cost depends on your profile.
No meaningful difference. Both take 25-35 days typically. Approval difficulty varies by your credit and documentation quality.
Both allow gifts. FHA is more flexible—you can use gifts for the entire down payment with no minimum borrower contribution required.