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in Novato, CA
Novato buyers face a choice that changes their entire mortgage structure. Conventional loans reward strong credit with lower costs, while FHA loans open doors for buyers with thinner profiles.
The gap between these two options widens in Marin County's price range. One requires more upfront strength; the other trades flexibility for ongoing costs.
Conventional loans demand 620+ credit and typically 5-20% down. Private mortgage insurance drops off at 20% equity, unlike FHA's lifetime premium on some loans.
These mortgages cap at $766,550 in Marin County for 2024. Anything above that pushes you into jumbo territory with stricter rules.
Lenders price conventional loans based on your profile. A 740 score gets you meaningfully better rates than a 680, often half a point or more difference.
FHA loans accept 580 credit scores with just 3.5% down. You pay an upfront mortgage insurance premium of 1.75%, then annual premiums that rarely disappear.
These loans work up to $644,000 in Novato. That ceiling matters less here since many Marin properties exceed it anyway.
The insurance structure kills FHA's appeal for strong borrowers. You're stuck paying 0.55-0.85% annually on top of your mortgage rate for decades.
Down payment tells the immediate story. FHA needs $22,540 minimum on a $644,000 loan; conventional at 5% needs $32,200 on the same amount.
Mortgage insurance creates the real cost divergence. Conventional PMI might run $200 monthly and cancel after five years of appreciation. FHA charges $350+ monthly forever on low-down loans.
Credit pricing hits conventional harder upfront but pays back over time. A 640 score might face a 1.5% rate penalty on conventional but only 0.25% more on FHA at origination.
Choose FHA if you're under 640 credit or can't hit 5% down payment. The insurance costs sting, but you're buying now instead of renting for two more years.
Go conventional with 680+ credit and 10% down available. You'll save $150-300 monthly once PMI drops, and your rate starts lower from day one.
Many Novato buyers start FHA then refinance to conventional after building equity. That works if rates don't spike and your credit improves to 740+.
For Marin County price points, conventional wins most comparisons. FHA's loan limit cuts out before you reach median pricing in many neighborhoods anyway.
FHA caps at $644,000 in Marin County. Many Novato homes exceed that, forcing you into conventional or jumbo financing regardless of preference.
PMI drops automatically at 78% loan-to-value. You can request cancellation at 80% if you've made regular payments for at least two years.
Yes, on loans with under 10% down payment. FHA mortgages with 10%+ down see insurance cancel after 11 years instead.
Conventional typically closes quicker since FHA requires additional property inspections. Sellers in Novato often prefer conventional offers for this reason.
You'd refinance into a conventional mortgage once you hit 20% equity. Rates need to stay flat or drop for this move to make financial sense.