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in Merced, CA
Merced borrowers have two solid paths to homeownership — conventional and FHA. The right choice depends on your credit profile and cash reserves.
Most first-time buyers lean FHA for the lower down payment. Buyers with stronger credit save more long-term with conventional financing.
Conventional loans demand higher credit scores — typically 620 minimum, but 740+ unlocks the best rates. You'll need 3-5% down for a primary residence.
These loans avoid upfront mortgage insurance if you put 20% down. Below that threshold, you pay PMI until you hit 20% equity.
Rate pricing rewards strong borrowers. A 760 score can save you 0.5-0.75% compared to a 680 score on the same loan amount.
FHA loans accept 580 credit scores with just 3.5% down. You can qualify with 500-579 credit if you bring 10% down.
You'll pay 1.75% upfront insurance plus annual premiums for the loan's life on most loans. That premium runs 0.55-0.85% of your loan balance yearly.
FHA allows higher debt ratios than conventional — up to 56.9% in some cases. Sellers can contribute up to 6% toward your closing costs.
Credit standards separate these programs most. Conventional demands 620 minimum while FHA accepts 580 — a 40-point gap that matters.
Mortgage insurance works differently. Conventional PMI cancels at 20% equity. FHA insurance sticks around unless you refinance later.
Loan limits give conventional an edge on pricier homes. FHA caps at $498,257 in Merced County while conventional goes to $766,550.
Choose FHA if your credit sits below 660 or you're stretching to save 3.5% down. The lower barriers outweigh the long-term insurance cost for most first-timers.
Go conventional if you have 5-10% down and 700+ credit. You'll pay less monthly and drop insurance faster — sometimes saving $200-300 per month.
Run the numbers both ways. A $350,000 Merced home with 5% down costs $240/month more on FHA due to insurance premiums over 30 years.
Yes, refinance to conventional once you have 20% equity and 620+ credit. This drops mortgage insurance and often lowers your rate.
Both take 30-45 days typically. FHA needs an FHA-approved appraiser which can add 3-5 days in smaller markets.
Many do — FHA appraisals flag repairs more strictly. Conventional feels cleaner to sellers worried about deal complications.
FHA approves 580+ routinely. Conventional is possible at 620 but expect rate hits until you reach 700.
On a $350K loan: $6,125 upfront plus $240/month ongoing. That's $2,880 yearly you can't recover.