Loading
in Merced, CA
Most Merced buyers choose between two loan types: conventional and FHA. The right pick depends on your credit, down payment, and how long you plan to stay.
We run deals through 200+ wholesale lenders. These two programs come up constantly — and the differences matter more than most buyers realize.
Conventional loans are not backed by the government. Lenders take on the risk, so they want stronger credit — typically 620 or higher.
The big advantage: no permanent mortgage insurance. Once you hit 20% equity, you can drop PMI (private mortgage insurance) entirely.
FHA loans are insured by the Federal Housing Administration. That backing lets lenders approve borrowers with scores as low as 580 and just 3.5% down.
The tradeoff is MIP — mortgage insurance premium. FHA charges it upfront and monthly. If you put down less than 10%, it stays for the life of the loan.
HousingWire flagged the 30-year fixed hitting 6.57% recently. At those rates, FHA's lower-rate floor can narrow the gap with conventional — but MIP costs eat back the savings fast.
Conventional wins on total cost for buyers with strong credit. FHA wins on access for buyers with thin credit or smaller down payments. Rates vary by borrower profile and market conditions.
Score above 700 with 5%+ down? Conventional likely costs less over time. Score under 660 or down payment under 5%? FHA is usually the path that gets you approved.
In Merced, many first-time buyers land in FHA territory. Entry-level prices make 3.5% down doable — but plan to refinance into conventional once your equity grows.
Yes. Once you build 20% equity, refinancing into conventional removes mortgage insurance entirely. Many Merced buyers do this within a few years.
Both conventional and FHA limits apply at the county level. Merced County limits are below high-cost California counties — confirm current figures before shopping.
FHA appraisals have stricter condition requirements, which can slow things down. Factor in extra time if the home needs repairs.
Not always. With a lower credit score, conventional PMI can be pricier than FHA MIP. Run the numbers on both before assuming. Rates vary by borrower profile and market conditions.
Most conventional lenders require at least 620. Better rates kick in at 680 and above.
Yes. Both FHA and conventional allow gift funds for down payment. FHA has more flexibility on the sourcing rules.