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in Torrance, CA
Torrance buyers face a real choice between conventional and FHA financing. Each loan type serves different borrower profiles, with distinct trade-offs in cost, flexibility, and approval odds.
Your credit score and down payment size will largely determine which path makes sense. Most borrowers save money long-term with conventional loans, but FHA opens doors for those with limited cash or lower credit.
Conventional loans require stronger credit—typically 620 minimum, though 740+ gets you the best rates. You can put down as little as 3%, but anything under 20% triggers private mortgage insurance until you hit 20% equity.
These loans offer the cleanest exit from mortgage insurance and lower overall costs for qualified borrowers. Loan limits in Los Angeles County reach $806,500 for 2024, covering most Torrance properties without jumping to jumbo territory.
Sellers prefer conventional offers because they close more reliably than government-backed loans. Appraisals are less strict, and underwriting moves faster when your credit and income are solid.
FHA loans accept credit scores as low as 580 with 3.5% down, or 500-579 with 10% down. This makes them the go-to option for first-time buyers or anyone rebuilding credit after financial setbacks.
The upfront mortgage insurance premium hits 1.75% of your loan amount at closing, then annual premiums of 0.55%-0.85% stay for the loan's life on most purchases. That insurance never drops off unless you refinance to conventional later.
FHA appraisers enforce stricter property standards than conventional. Peeling paint, foundation cracks, or water damage can kill deals. Loan limits match conventional at $806,500 in LA County.
Credit scores create the biggest divide. Conventional demands 620+ and rewards scores above 740 with significantly lower rates. FHA will approve 580 scores all day, though you'll pay higher mortgage insurance for that flexibility.
Mortgage insurance costs tell the real story. Conventional PMI drops off at 20% equity and costs less monthly. FHA charges 1.75% upfront plus annual premiums that stick around forever unless you refinance out.
Property condition matters more with FHA. Their appraisers flag issues conventional lenders ignore—chipped paint, handrail gaps, minor foundation settling. In competitive Torrance markets, sellers often reject FHA offers to avoid repair hassles.
Choose FHA if your credit sits below 680 or you're stretching to cover the down payment. The upfront and ongoing insurance costs hurt, but getting approved matters more than optimizing costs when you're building equity in Torrance real estate.
Go conventional if you have 680+ credit and at least 5% down. You'll pay less in insurance, drop PMI faster, and present a cleaner offer to sellers. Most buyers refinance from FHA to conventional once their credit and equity improve anyway.
Run the numbers both ways with current rates. Sometimes FHA wins even with better credit when rates drop or you plan to sell within five years. Rates vary by borrower profile and market conditions—talk to a broker who shops both programs.
Yes, most borrowers refinance to conventional once they hit 20% equity and their credit improves. This eliminates FHA's permanent mortgage insurance and typically lowers your monthly payment.
Conventional loans close 3-5 days faster on average because appraisals are less strict and underwriting is simpler. Sellers prefer them in competitive situations for this reason.
No, FHA keeps the same 3.5% minimum for condos. But the condo complex must be FHA-approved, which eliminates many buildings in Torrance from eligibility.
FHA changed rules in 2013 to make insurance permanent on most loans. This funds their insurance pool but costs borrowers thousands over time compared to conventional PMI.
Yes, FHA allows financing two years after bankruptcy discharge and three years after foreclosure. Conventional loans typically require four and seven years respectively.