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in Willits, CA
Willits sits in rural Mendocino County, which means you qualify for both FHA and USDA loans. Most buyers here face the same question: put 3.5% down with FHA or nothing down with USDA.
Both programs offer lower rates than conventional loans and accept credit scores in the 600s. The real difference comes down to upfront cash, income limits, and ongoing mortgage insurance costs.
FHA loans require 3.5% down with a 580 credit score, or 10% down if your score sits between 500-579. You pay an upfront mortgage insurance premium of 1.75% at closing, then annual premiums of 0.55% to 0.85% depending on loan size and down payment.
There are no income caps with FHA, which helps if you earn too much for USDA eligibility. The trade-off is higher mortgage insurance that stays on most loans for the full term unless you refinance later.
USDA loans offer zero down payment financing for rural properties in approved areas. Most of Willits qualifies as eligible rural territory through the USDA map system.
You need a 640 credit score minimum at most lenders, though the program allows 580 with compensating factors. Income cannot exceed 115% of area median income for your household size. USDA charges a 1% upfront guarantee fee and 0.35% annual fee, both lower than FHA.
Down payment separates these programs first. FHA needs 3.5% minimum while USDA offers true zero-down financing. On a $400,000 home, that's $14,000 upfront versus nothing.
Income limits matter more in Willits than people expect. USDA caps household income at roughly $103,500 for a family of four in Mendocino County. FHA has no income ceiling, so higher earners default to FHA even if they prefer zero down.
Mortgage insurance costs less with USDA long-term. The annual fee of 0.35% beats FHA's 0.55% to 0.85% rate. Over 30 years on a $400,000 loan, that difference adds up to $30,000 to $60,000 in savings.
Choose USDA if you meet the income limits and want to preserve cash. Zero down plus lower insurance makes it the better deal financially when you qualify. Just verify the specific property address on the USDA eligibility map before making offers.
Go with FHA if your household income exceeds USDA caps or you're buying in one of the few non-eligible pockets near Willits. FHA also works better for fixer-uppers that need renovation financing through the 203k program.
Most of Willits qualifies as USDA-eligible rural territory. Check the specific address at the USDA property eligibility map before making an offer to confirm.
Income caps adjust by household size but typically range from $90,000 for one person to $103,500 for four. These limits update annually and vary slightly by census tract.
Both programs allow manufactured homes if they meet specific foundation and construction standards. The home must be on a permanent foundation and classified as real property.
USDA charges a 1% guarantee fee versus FHA's 1.75% upfront premium. On a $400,000 loan, USDA saves you $3,000 at closing before other fees.
Yes, you can refinance either loan into a conventional mortgage once you hit 20% equity. This eliminates monthly insurance and often lowers your rate simultaneously.