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in East Palo Alto, CA
East Palo Alto homebuyers have two strong government-backed loan options to consider. Both FHA and USDA loans offer paths to homeownership with less money down than conventional mortgages require.
The right choice depends on your location within San Mateo County, income level, and how much you can put toward a down payment. Understanding the core differences helps you move forward with confidence.
FHA loans from the Federal Housing Administration allow down payments as low as 3.5% for borrowers with credit scores of 580 or higher. These loans accept credit scores down to 500 with a 10% down payment, making them accessible to many first-time buyers.
You'll pay an upfront mortgage insurance premium of 1.75% of the loan amount, plus monthly mortgage insurance. FHA loans work throughout East Palo Alto regardless of property location, and they have no income limits.
These loans allow debt-to-income ratios up to 43% in most cases, sometimes higher with compensating factors. Sellers can contribute up to 6% toward your closing costs, which reduces your cash needed at closing.
USDA loans require zero down payment for eligible properties in qualifying areas. These loans from the U.S. Department of Agriculture target suburban and rural locations, though some parts of San Mateo County may not qualify.
Income limits apply based on household size and county median income. You'll need a credit score of at least 640 for streamlined processing. USDA loans charge a 1% upfront guarantee fee and an annual fee of 0.35% of the loan balance.
Properties must meet USDA location eligibility requirements, which typically exclude densely populated urban areas. The program aims to promote homeownership in less developed communities while keeping monthly costs affordable.
The biggest difference is down payment: FHA requires at least 3.5%, while USDA requires nothing. However, USDA loans have strict property location requirements that may exclude parts of East Palo Alto, whereas FHA works everywhere in the city.
Income limits create another major distinction. USDA caps your household income based on area median levels, while FHA has no income restrictions. USDA mortgage insurance costs less over the loan term compared to FHA's ongoing premiums.
Credit requirements favor FHA for borrowers with challenged credit. FHA accepts scores as low as 580 for minimum down payment, while USDA typically requires 640. Rates vary by borrower profile and market conditions for both programs.
Choose USDA if your target property qualifies by location, your household income falls within program limits, and you want to preserve cash by putting nothing down. This option works best for buyers who have steady income but limited savings.
Pick FHA if you're buying anywhere in East Palo Alto regardless of location restrictions, your income exceeds USDA limits, or your credit score falls between 580-639. FHA provides more flexibility on where you buy and who qualifies.
Many San Mateo County properties fall outside USDA eligibility zones due to population density. Check property eligibility early in your search to avoid disappointment. An experienced mortgage broker can verify which program fits your specific situation and property choice.
Parts of San Mateo County may qualify, but many East Palo Alto properties fall outside USDA eligible zones. Check the USDA property eligibility map before house hunting to confirm your target area qualifies.
USDA loans typically cost less for mortgage insurance over time. USDA charges 0.35% annually while FHA charges 0.55-0.85% depending on loan terms and down payment amount.
Yes, both programs allow sellers to contribute toward closing costs. FHA permits up to 6% in seller concessions, while USDA allows up to 6% as well, helping reduce your upfront cash requirements.
FHA is typically easier due to lower credit requirements and no income caps. USDA requires higher credit scores and limits your household income based on county median levels.
Yes, if your property qualifies for USDA eligibility and you meet income requirements. Refinancing from FHA to USDA can eliminate your down payment equity requirement on future moves within eligible areas.