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in Fairfax, CA
Most Fairfax buyers face the same fork in the road: conventional or FHA financing. The right choice depends on your down payment, credit score, and how long you plan to own the home.
FHA loans get you in the door with less cash upfront. Conventional loans cost less over time if you qualify. Here's how to pick between them for your Marin County purchase.
Conventional loans aren't backed by the government, which means lenders set stricter qualification standards. You typically need a 620 credit score minimum and 3-5% down, though 20% down eliminates PMI entirely.
These loans shine when you have solid credit and meaningful savings. Rates beat FHA if your score tops 700. PMI drops off automatically once you hit 78% loan-to-value, unlike FHA's lifetime mortgage insurance on loans under 10% down.
Conventional loans handle higher loan amounts better than FHA in expensive markets. You can borrow more without hitting program caps. Plus, sellers often prefer conventional offers because they close with fewer inspection requirements.
FHA loans are insured by the Federal Housing Administration, allowing lenders to approve borrowers with 580 credit scores and just 3.5% down. This makes them the go-to option for first-time buyers with limited savings.
The tradeoff comes in insurance costs. You pay 1.75% upfront mortgage insurance premium at closing, plus annual premiums of 0.55-0.85% for the life of the loan if you put down less than 10%. That monthly cost never disappears unless you refinance.
FHA loans forgive more credit issues than conventional programs. Recent bankruptcies, foreclosures, or spotty payment history don't automatically disqualify you. Debt-to-income ratios can stretch higher too, sometimes up to 50% with compensating factors.
Credit requirements split these programs. Conventional needs 620 minimum and rewards higher scores with better rates. FHA accepts 580 scores but charges everyone similar insurance premiums regardless of credit strength.
Mortgage insurance works differently. Conventional PMI drops off automatically or by request once you build equity. FHA insurance sticks around permanently unless you put 10%+ down, then it falls off after 11 years.
Down payment minimums look similar on paper—3% conventional versus 3.5% FHA. But conventional requires 5% down on two-unit properties and 15-25% on investment properties. FHA keeps it at 3.5% across the board for owner-occupied homes up to four units.
Interest rates vary by borrower profile and market conditions. Conventional typically wins with 700+ credit scores. FHA rates beat conventional for sub-660 scores because the government backing offsets lender risk.
Choose FHA if you're bringing less than 10% down and your credit score sits below 680. The lower down payment and flexible approval more than offset the lifetime mortgage insurance. This applies to most first-time Fairfax buyers stretching to afford Marin County.
Go conventional if you have 10%+ down and 700+ credit. You'll pay less monthly and build equity faster. The PMI drops off eventually, while FHA insurance drags on your payment forever. Run the numbers five years out—conventional almost always wins long-term.
Consider FHA for multi-family properties if you're house-hacking. Buying a duplex in Fairfax with 3.5% down beats saving 15% for conventional. The rental income helps cover that FHA insurance premium while you build equity as an owner-occupant.
Yes, through a refinance once you hit 20% equity and your credit improves. Most borrowers do this within 3-5 years to drop FHA mortgage insurance.
Some prefer conventional because FHA requires property meet minimum standards. In competitive situations, conventional offers edge out FHA on similar terms.
FHA likely costs less monthly despite the insurance. Conventional rates jump significantly in that credit band while FHA pricing stays flat.
Standard FHA requires homes meet livability standards. For major rehabs, you need FHA 203k renovation financing which works but adds complexity.
FHA charges 0.55-0.85% annually plus 1.75% upfront. Conventional PMI runs 0.3-1.5% annually based on down payment and credit, no upfront fee.