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in Merced, CA
Both FHA and USDA loans help Merced buyers with limited cash and modest credit. FHA requires 3.5% down anywhere in the city, while USDA offers zero down in eligible zones.
Most of Merced qualifies for USDA loans due to its rural designation. Income caps apply for USDA, but FHA has no household income limits.
FHA loans need 3.5% down with a 580 credit score, or 10% down with scores between 500-579. Mortgage insurance lasts the life of the loan unless you refinance out later.
FHA works in all Merced neighborhoods with no household income restrictions. You can buy homes up to FHA loan limits, which exceed most Merced purchase prices.
FHA allows higher debt-to-income ratios than conventional loans. Sellers can contribute up to 6% toward your closing costs, reducing your cash to close.
USDA loans require zero down payment and include the upfront guarantee fee in your loan amount. Monthly insurance costs less than FHA at 0.35% versus 0.55%.
You must meet income limits based on household size, typically 115% of area median income for Merced County. Properties must sit in USDA-eligible zones, covering most of Merced.
USDA accepts 640 credit scores for automated approvals. Processing takes 2-4 weeks longer than FHA due to USDA's review layer.
The main split is down payment versus income restrictions. FHA costs 3.5% down but works for any income level, while USDA requires no down payment but caps household earnings.
FHA closes faster and accepts lower credit scores. USDA saves you money long-term with lower insurance costs and no down payment requirement.
Property location matters for USDA since only eligible rural zones qualify. FHA has no property location restrictions within Merced city limits.
Pick USDA if you have zero savings for a down payment and your household income stays under area limits. Most Merced single-income households qualify, and you avoid the 3.5% cash requirement.
Choose FHA if you earn above USDA income caps or need to close quickly. FHA also works if the property sits outside USDA-eligible zones, though most Merced homes qualify for both programs.
Run the numbers with both options before deciding. USDA's lower insurance saves $50-80 monthly compared to FHA, adding up over 30 years.
FHA works citywide with no restrictions. USDA requires properties in eligible rural zones, which covers most but not all Merced addresses.
USDA costs less long-term due to zero down payment and lower monthly insurance. FHA builds equity faster if you put money down.
Yes. FHA allows up to 6% seller concessions, while USDA caps concessions at 6% as well to cover closing costs.
Limits vary by household size, typically around $103,500 for 1-4 people and $136,600 for 5-8 people. Check current limits before applying.
Yes, if you still meet USDA income and property location requirements. Many borrowers refinance to drop FHA mortgage insurance costs.