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in San Luis Obispo, CA
San Luis Obispo homebuyers often choose between two popular government-backed loan programs. FHA loans offer low down payments for first-time buyers, while VA loans provide zero-down financing for military members.
Both programs help make homeownership accessible in this Central Coast community. Understanding the key differences helps you select the right path for your purchase.
FHA loans require just 3.5% down with a credit score as low as 580. The Federal Housing Administration insures these mortgages, making lenders more willing to approve buyers with limited savings or credit challenges.
You'll pay mortgage insurance premiums throughout the loan term. The upfront premium is 1.75% of the loan amount, plus an annual premium that varies based on loan size and down payment.
FHA loans work for primary residences including single-family homes, condos, and multi-unit properties up to four units. Available to all qualified borrowers regardless of military service.
VA loans require zero down payment for eligible veterans, active-duty service members, and qualifying spouses. The Department of Veterans Affairs guarantees a portion of these loans, eliminating the need for private mortgage insurance.
You'll pay a one-time funding fee ranging from 1.4% to 3.6% of the loan amount, depending on down payment and service category. Veterans with service-connected disabilities may qualify for funding fee exemptions.
VA loans offer competitive interest rates and flexible credit requirements. They're limited to primary residences but can be used for single-family homes, condos, and new construction in San Luis Obispo.
Eligibility creates the biggest distinction. FHA loans are available to anyone who qualifies financially, while VA loans require military service credentials through the Certificate of Eligibility process.
Down payment requirements differ significantly. FHA borrowers need at least 3.5% down, whereas VA borrowers can finance 100% of the purchase price. This difference impacts how quickly you can buy.
Insurance costs vary between programs. FHA requires both upfront and ongoing mortgage insurance premiums. VA charges a one-time funding fee but no monthly mortgage insurance, potentially saving thousands over the loan term.
Loan limits don't apply to VA loans in most cases, while FHA loans have county-specific maximums. Both programs offer competitive interest rates that vary by borrower profile and market conditions.
Choose VA if you're an eligible veteran or service member. The zero-down feature and absence of monthly mortgage insurance make it the stronger financial option when you qualify for both programs.
Select FHA if you're not military-affiliated and need a low down payment option. The 3.5% requirement and flexible credit standards help first-time buyers enter the San Luis Obispo market sooner.
Some veterans with lower credit scores might find FHA more accessible initially. Others may benefit from using FHA if they've already used their VA entitlement on another property and haven't sold it yet.
You cannot combine the programs on one property. However, you could have an existing FHA loan on one home and use your VA benefit for another, subject to entitlement availability and qualifying for both payments.
VA loans typically offer slightly lower rates due to the government guarantee. Rates vary by borrower profile and market conditions. Both programs remain competitive with conventional financing options.
Yes, both programs permit seller-paid closing costs. FHA allows up to 6% of the purchase price, while VA allows up to 4%. This helps reduce your cash needed at closing.
No, both FHA and VA loans require owner occupancy. You must live in the property as your primary residence. Multi-unit properties are allowed if you occupy one unit.
FHA and VA both offer flexibility for credit challenges. FHA has published minimum score requirements, while VA doesn't mandate specific scores. Lenders set their own overlays for both programs.