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in Hollister, CA
Most Hollister buyers ask whether conventional or FHA financing makes more sense for their first purchase. The answer depends on how much cash you have and what your credit looks like.
FHA allows just 3.5% down but charges mortgage insurance for the loan's life. Conventional requires more upfront but can drop PMI once you hit 20% equity.
San Benito County's mix of newer developments and established neighborhoods works well for both loan types. Your choice comes down to down payment size and monthly budget priorities.
Conventional loans deliver the lowest lifetime cost if you have decent credit and at least 5% down. You need 620+ credit, though 740+ gets the best pricing.
Put down 20% and you skip PMI entirely. Put down less and you pay PMI until you reach 20% equity, then it drops off automatically.
Conventional works best for Hollister buyers with stable W-2 income and clean credit who want the lowest long-term cost. Loan limits go up to $806,500 for single-family homes in San Benito County.
FHA lets you buy with just 3.5% down if your credit is 580 or higher. You can even go as low as 500 credit with 10% down, though few lenders take that risk.
The catch is mortgage insurance. You pay an upfront premium at closing plus monthly premiums that never cancel unless you refinance to conventional later.
FHA makes sense for Hollister buyers who need minimal down payment or have credit in the 580-680 range. Sellers here accept FHA offers regularly since appraisals rarely kill deals.
Down payment splits these loans apart. FHA requires $10,500 down on a $300,000 home. Conventional with 5% down needs $15,000, and you'll pay higher PMI than FHA's monthly premium initially.
Credit scoring matters more with conventional. A 680 score gets decent FHA pricing but mediocre conventional rates. Hit 740 and conventional becomes noticeably cheaper monthly.
Long-term costs flip the equation. FHA's lifetime mortgage insurance can cost $50,000+ over 30 years. Conventional PMI drops off once you build equity, saving thousands.
Debt-to-income ratios favor FHA slightly. Conventional typically caps at 45-50% DTI while FHA can stretch to 55-57% with strong compensating factors.
Choose FHA if you have under 10% down or credit below 680. The slightly higher lifetime cost matters less than getting into a home now while Hollister inventory remains tight.
Go conventional if you have 10%+ down and 720+ credit. You'll pay less monthly and can eliminate PMI once you hit 20% equity through appreciation or paydown.
Plan to refinance FHA to conventional within 3-5 years if possible. This lets you use FHA's easy entry then drop that permanent mortgage insurance once your credit and equity improve.
Work with a broker who checks both options. Rate differences change weekly, and sometimes FHA actually costs less monthly despite the insurance.
Yes, refinance to conventional once you have 20% equity and your credit improves. This eliminates FHA's lifetime mortgage insurance.
Both take 25-35 days typically. Conventional can be slightly faster since FHA requires additional property inspections.
Most accept both equally. FHA appraisals can be stricter on property condition, which occasionally concerns sellers with older homes.
620 minimum to qualify. You need 740+ to get pricing that clearly beats FHA rates.
1.75% upfront plus 0.55-0.85% annually depending on down payment and loan amount. This adds $150-250 monthly on a $300,000 loan.
Only if the complex is FHA-approved. Conventional works with any condo that meets standard requirements.