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in Millbrae, CA
Millbrae homebuyers face an important choice between conventional and FHA loans. Each offers distinct advantages depending on your down payment capacity, credit profile, and long-term plans.
Conventional loans provide flexibility for buyers with strong credit and larger down payments. FHA loans open doors for first-time buyers and those with modest savings or credit challenges.
Understanding these differences helps you select the right financing for your San Mateo County home purchase. The best choice depends on your specific financial situation and homeownership goals.
Conventional loans are traditional mortgages not backed by government agencies. They typically require higher credit scores and larger down payments than government-backed options.
These loans offer competitive rates for qualified borrowers. You can avoid mortgage insurance entirely with 20% down, reducing your monthly payment significantly.
Conventional financing provides more flexibility in property types and loan amounts. Many Millbrae buyers prefer this option when they have strong credit and substantial savings for down payment and closing costs.
FHA loans are insured by the Federal Housing Administration, allowing lenders to offer more flexible terms. Down payments start at just 3.5% for buyers with credit scores of 580 or higher.
These government-backed mortgages accept lower credit scores than conventional loans. The trade-off includes mandatory mortgage insurance for the life of the loan in most cases.
FHA financing helps first-time buyers and those rebuilding credit enter the Millbrae housing market. The lower down payment requirement makes homeownership accessible sooner for many San Mateo County families.
Down payment requirements separate these options most clearly. Conventional loans typically require 5-20% down, while FHA loans start at 3.5%. However, FHA borrowers must pay both upfront and monthly mortgage insurance premiums regardless of down payment size.
Credit requirements differ significantly between the two programs. Conventional loans generally require scores of 620 or higher, with better rates for scores above 740. FHA loans accept scores as low as 580, making them accessible to more Millbrae buyers.
Mortgage insurance costs vary substantially. Conventional loans drop mortgage insurance when you reach 20% equity. FHA loans require mortgage insurance for the loan's entire term if you put down less than 10%, adding to your long-term costs.
Loan limits and property requirements also differ. Both programs have maximum loan amounts, but conventional loans offer higher limits for San Mateo County's housing market. FHA has stricter property condition requirements that may affect older Millbrae homes.
Choose conventional financing if you have good credit (above 680), at least 5% down, and want to minimize long-term costs. This option works best for Millbrae buyers who can afford larger down payments and qualify for competitive rates.
Select FHA financing if you're a first-time buyer, have limited savings for down payment, or your credit score falls below 680. The lower barriers to entry make FHA ideal for getting into the Millbrae market sooner, even with higher long-term insurance costs.
Consider your timeline and financial trajectory. If you plan to refinance within a few years as your credit improves, FHA provides immediate access. If you're settled financially and planning long-term ownership, conventional loans typically cost less over time.
Yes, you can refinance from FHA to conventional once you build 20% equity and your credit improves. This eliminates ongoing mortgage insurance and often reduces your monthly payment.
Rates vary by borrower profile and market conditions. Conventional loans typically offer lower rates for buyers with excellent credit, while FHA rates remain consistent regardless of credit score.
Both accept condos, but FHA requires the entire complex to be FHA-approved. Conventional loans have more flexible condo requirements, making them easier for some Millbrae properties.
FHA charges 1.75% upfront plus 0.55-0.85% annually. Conventional PMI costs 0.3-1.5% annually based on your down payment and credit, but cancels at 20% equity.
Both typically close in 30-45 days. Conventional loans may process slightly faster since they don't require FHA appraisal standards, but experienced lenders handle both efficiently.