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in Woodside, CA
Woodside homebuyers face an important choice between conventional and FHA financing. Each loan type offers distinct advantages depending on your down payment savings, credit profile, and long-term ownership plans.
Understanding the differences between these mortgage options helps you select the most cost-effective path to homeownership. The right choice can save you thousands over the life of your loan.
Conventional loans are not backed by a government agency and typically require stronger credit profiles. These mortgages offer competitive rates for qualified borrowers and eliminate mortgage insurance once you reach 20% equity.
Down payments start at 3% for first-time buyers, though putting down at least 20% avoids private mortgage insurance (PMI). Conventional financing works well when you have strong credit and adequate savings for closing costs.
These loans conform to Fannie Mae and Freddie Mac guidelines. They offer flexibility in property types and typically feature lower overall costs for well-qualified borrowers.
FHA loans are insured by the Federal Housing Administration and designed for buyers with limited savings or credit challenges. These mortgages require as little as 3.5% down with credit scores as low as 580.
All FHA loans include both upfront and annual mortgage insurance premiums. The upfront premium equals 1.75% of the loan amount, while annual premiums continue for the loan's life on most purchases with less than 10% down.
FHA financing allows higher debt-to-income ratios than conventional loans. This flexibility helps buyers qualify for larger loan amounts despite moderate incomes or past credit issues.
Credit requirements separate these loan types significantly. Conventional loans reward strong credit with better rates, while FHA accepts lower scores but charges mortgage insurance regardless of down payment size.
Down payment flexibility differs between programs. Both allow low down payments, but conventional loans let you avoid PMI entirely with 20% down, while FHA mortgage insurance remains for the loan term on most purchases.
Loan limits also vary by program. San Mateo County's conventional conforming limit exceeds FHA limits, giving conventional borrowers access to higher loan amounts on premium properties. Rates vary by borrower profile and market conditions.
Choose conventional financing if you have strong credit (above 680) and can put down at least 5-10%. You'll access better rates and eliminate mortgage insurance faster, reducing long-term costs substantially.
FHA makes sense when credit scores fall below 660 or you're stretching to afford the down payment. The more lenient approval standards help you purchase sooner, though you'll pay higher insurance costs over time.
Consider your timeline for building equity. Buyers planning to refinance within 3-5 years may benefit from FHA's accessibility, while those staying long-term typically save more with conventional financing and removable PMI.
Yes, refinancing from FHA to conventional eliminates mortgage insurance once you reach 20% equity. This switch can reduce monthly payments and total interest costs significantly.
Conventional loans typically offer better rates for borrowers with credit scores above 720. FHA rates remain competitive but total costs increase due to mandatory mortgage insurance premiums.
Conventional conforming loans offer higher limits than FHA in San Mateo County. For premium Woodside properties, conventional or jumbo financing provides necessary loan amounts.
Eliminating FHA insurance through conventional financing can save $200-400 monthly on a typical loan. Over 30 years, this represents $75,000-150,000 in total savings.
Both programs allow 3-3.5% down payments. Conventional offers 3% down for first-time buyers, while FHA requires 3.5% for most borrowers regardless of buyer status.