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in Sierra Madre, CA
Sierra Madre's older housing stock and premium pricing create different financing challenges than most LA County markets. Your loan choice affects both what you can buy and what you'll pay long-term.
FHA loans open doors for buyers with smaller down payments, but conventional financing often costs less over time. Here's how each works in this foothill community.
Conventional loans require 3-20% down depending on the lender and program. You need a 620 credit score minimum, though 680+ gets better rates.
No upfront mortgage insurance premium exists with conventional loans. If you put down less than 20%, you pay PMI monthly until you hit 20% equity. On Sierra Madre's higher-priced homes, this matters—PMI drops off automatically once you reach that threshold.
FHA loans accept 3.5% down with a 580 credit score, or 10% down if your score sits between 500-579. You pay 1.75% upfront mortgage insurance plus annual MIP that never drops off on most loans.
Appraisers scrutinize property condition more closely with FHA financing. Many Sierra Madre homes built in the 1920s-1950s need minor repairs to pass FHA inspection. Sellers sometimes hesitate on FHA offers for this reason, though the financing itself is solid.
The upfront cost split favors FHA—3.5% down versus 5-10% conventional for most first-time buyers. But FHA's 1.75% upfront insurance plus permanent monthly MIP adds up. On a $800,000 loan, that's $14,000 upfront and roughly $500/month in MIP that never disappears.
Conventional PMI costs less monthly and cancels once you build equity. Credit scores above 700 get significantly better conventional rates than FHA offers. For Sierra Madre's pricier inventory, that rate difference compounds into tens of thousands over 30 years.
Choose FHA if your credit sits below 680 or you can only manage 3.5-5% down. The higher ongoing costs make sense when it's your only path to homeownership. Plan to refinance to conventional once your credit improves and you build equity.
Go conventional if you have 650+ credit and can manage 5-10% down. You'll pay less over time and face fewer property condition hurdles. For Sierra Madre's older homes, avoiding FHA's stricter appraisal requirements often smooths the transaction.
Yes, but the appraiser will flag safety issues like peeling paint, handrail problems, or roof damage. Sellers must complete repairs before closing, which sometimes kills deals.
Minimum is 620, but you need 680+ to beat FHA rates. Below 680, FHA often costs less despite the mortgage insurance because conventional rates jump at lower scores.
Automatically at 20% equity based on the original amortization schedule. You can request removal once you hit 20% equity through payments or appreciation.
On loans over 90% LTV, MIP lasts the full loan term. Put down 10% or more, and it drops after 11 years—still much longer than conventional PMI.
Conventional typically wins on homes above $700,000. The rate advantage and canceling PMI offset the higher down payment requirement over time.