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in Buellton, CA
Buellton homebuyers often qualify for two excellent government-backed mortgage programs. Both FHA and USDA loans offer advantages for buyers who may not have large down payments saved.
The choice between these programs depends on your down payment capacity, income level, and where in Santa Barbara County you're buying. Each program serves different buyer needs with unique benefits and requirements.
Understanding how these loans differ helps you choose the option that saves you the most money and matches your financial situation. Let's compare what makes each program distinct for Buellton area buyers.
FHA loans require just 3.5% down for buyers with credit scores of 580 or higher. The Federal Housing Administration insures these mortgages, making lenders more comfortable approving borrowers with modest credit histories or higher debt ratios.
These loans work throughout Buellton and all of Santa Barbara County regardless of location or income. FHA accepts down payment gifts from family members and allows co-borrowers to strengthen your application.
FHA charges both upfront mortgage insurance (1.75% of loan amount) and monthly premiums. The upfront fee can be rolled into your loan amount. Monthly insurance remains for the loan's life on most FHA mortgages with less than 10% down.
USDA loans require zero down payment for eligible rural and suburban properties. The program targets moderate-income buyers purchasing in designated areas, making homeownership accessible without years of saving.
Buellton properties must fall within USDA-eligible zones, which you can verify through the USDA property eligibility map. Income limits apply based on household size and county median income levels set by the program.
USDA charges a 1% upfront guarantee fee and an annual fee of 0.35% of the loan balance. Both fees are lower than FHA's insurance costs. The upfront fee rolls into your loan amount, requiring no cash at closing beyond standard costs.
The down payment requirement creates the biggest split between programs. FHA needs 3.5% down while USDA requires nothing down for eligible buyers. However, USDA restricts who qualifies based on income and location.
USDA's income limits mean higher earners cannot use the program, even in eligible areas. FHA has no income ceiling, making it available to all buyers regardless of earnings. USDA also requires properties meet rural or suburban designations.
Mortgage insurance costs less with USDA loans. The annual fee of 0.35% beats FHA's typical 0.55-0.85% monthly premium. Over a 30-year loan, this difference saves thousands of dollars for borrowers who qualify for both programs.
Processing times differ between programs. FHA loans typically close faster because they don't require USDA's additional property and income verification steps. USDA applications need extra review time for eligibility documentation.
Choose USDA if your income falls within program limits and your target property sits in an eligible zone. The zero down payment and lower insurance make it the better financial choice when you qualify for both options.
Select FHA if you exceed USDA income limits, need to buy in an ineligible area, or want faster closing. FHA's wider availability and fewer restrictions help buyers who don't fit USDA's parameters.
Buyers with saved funds might still prefer USDA over FHA to preserve cash for home improvements or reserves. The money you don't spend on down payment can cover moving costs, furniture, or emergency savings.
Connect with a mortgage professional to verify USDA eligibility for your specific situation. They'll check property locations, run income calculations, and compare actual costs between programs using current rates.
Most Buellton areas qualify for USDA loans as the town meets rural designation criteria. Verify specific properties using the USDA eligibility map, as some locations may fall outside eligible zones.
FHA typically accepts lower credit scores, with 580 being the minimum for 3.5% down. USDA generally requires 640 or higher, though some lenders may accept lower scores with compensating factors.
USDA sets limits based on household size and county median income. Limits adjust annually and include all household members' income, not just those on the loan application.
USDA allows refinancing to conventional loans to remove insurance once you have 20% equity. FHA requires refinancing to conventional, as the insurance doesn't automatically drop off.
USDA typically costs less due to zero down payment and lower annual insurance fees. However, actual costs depend on your interest rate, which varies by borrower profile and market conditions.