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in Burlingame, CA
Burlingame homebuyers face a key decision when financing their purchase: conventional or FHA financing. Each loan type offers distinct advantages that can significantly impact your monthly payment and upfront costs.
Conventional loans appeal to buyers with strong credit and larger down payments. FHA loans serve those who need more flexible qualification standards. Understanding these differences helps you choose the right path for your Burlingame home purchase.
Your choice affects everything from your down payment amount to your monthly mortgage insurance costs. San Mateo County's competitive market makes selecting the right financing strategy especially important.
Conventional loans are not backed by any government agency. Private lenders set their own guidelines, though most follow standards established by Fannie Mae and Freddie Mac. These mortgages reward borrowers who bring strong financial profiles to the table.
Down payments start at 3% for first-time buyers, though 5-20% is more common. If you put down less than 20%, you'll pay private mortgage insurance (PMI). The good news: PMI cancels automatically once you reach 22% equity, and you can request removal at 20%.
Credit score requirements typically start around 620, though 700+ scores unlock the best rates. Rates vary by borrower profile and market conditions. Debt-to-income ratios usually cap at 43-50%, giving you flexibility in how much you can borrow relative to your income.
FHA loans carry insurance from the Federal Housing Administration, which protects lenders against default. This government backing allows lenders to accept lower credit scores and smaller down payments. The FHA program was specifically designed to expand homeownership opportunities.
You can purchase with as little as 3.5% down if your credit score is 580 or higher. Scores between 500-579 require 10% down. However, you'll pay an upfront mortgage insurance premium of 1.75% of the loan amount, which can be rolled into your mortgage.
Monthly FHA mortgage insurance (MIP) remains for the life of the loan on most purchases with less than 10% down. Your debt-to-income ratio can stretch to 50% or higher with compensating factors. This flexibility helps buyers who might not qualify conventionally.
The mortgage insurance structures differ dramatically. Conventional PMI disappears once you build sufficient equity. FHA MIP typically stays for the entire loan term unless you put down 10% or more. This long-term cost can significantly impact your monthly payment over time.
Credit score requirements give FHA loans a clear advantage for buyers rebuilding credit. Conventional loans demand higher scores but reward them with better rates. Your specific credit profile determines which option saves you more money long-term.
Down payment flexibility varies by situation. While both offer low down payment options, FHA's 3.5% minimum with a 580 score is more accessible than conventional's 3% option, which has stricter requirements. San Mateo County buyers should calculate total costs across both scenarios.
Loan limits matter in Burlingame's housing market. Both conventional and FHA loans have conforming limits that determine maximum borrowing amounts. Working with a knowledgeable broker helps you understand which option accommodates your price range.
Choose conventional financing if you have a credit score above 700 and can put down at least 5-10%. You'll likely secure better rates and avoid lifetime mortgage insurance. The ability to cancel PMI once you reach 20% equity can save thousands over time.
FHA loans make sense when your credit score falls between 580-680 or you have limited savings for a down payment. The more lenient qualification standards help you enter the market sooner. Just factor the long-term mortgage insurance costs into your budget planning.
Some Burlingame buyers start with FHA financing and refinance to conventional once they build equity and improve their credit. This strategy provides market access now while positioning you for better terms later. Your loan officer can model both scenarios to show lifetime costs.
Neither option is universally better. Your financial situation, credit profile, and long-term plans determine the right choice. San Mateo County's market conditions also play a role in structuring the most competitive offer.
Yes, both loan types work for condos if the complex meets program requirements. FHA has stricter condo approval standards, so conventional financing sometimes offers more options for condo buyers.
FHA MIP typically adds 0.55% of your loan amount annually, divided across 12 monthly payments. On a $700,000 loan, that's about $320 monthly in addition to your upfront 1.75% premium.
Yes. Down payments of 20% or more eliminate PMI and often unlock better interest rates. Lenders view larger down payments as lower risk, which translates to more favorable terms.
Absolutely. Many buyers refinance from FHA to conventional once they build 20% equity and improve their credit. This strategy eliminates monthly mortgage insurance and can reduce your interest rate.
Conventional loans often close slightly faster and may be viewed more favorably by sellers. However, both typically close within 30-45 days with proper preparation and documentation.