Question 1

Can I use an FHA loan to buy a vacation rental in Monterey?

Accepted Answer

No. FHA requires the property to be your primary residence. For vacation or investment properties, you need conventional financing.

Question 2

Does FHA always have a higher rate than conventional?

Accepted Answer

Not always — but conventional rates are typically better for borrowers with 700+ credit scores. Rates vary by borrower profile and market conditions.

Question 3

When does conventional PMI go away?

Accepted Answer

Lenders cancel PMI once you reach 20% equity in the home. FHA mortgage insurance generally stays for the life of the loan.

Question 4

What credit score do I need for each loan?

Accepted Answer

Conventional requires at least 620. FHA allows 580 with 3.5% down, or as low as 500 with 10% down.

Question 5

Which loan has a lower down payment?

Accepted Answer

FHA starts at 3.5% down with a 580 credit score. Conventional can go as low as 3%, but that typically requires stronger credit.

Question 6

Can I refinance an FHA loan into a conventional loan later?

Accepted Answer

Yes. Once you build equity and your credit improves, refinancing out of FHA drops the lifetime mortgage insurance requirement.

Conventional vs FHA Loans in Monterey, CA