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in Montague, CA
Montague buyers face a straightforward choice: put more down with a conventional loan or stretch for lower upfront costs with FHA. The right answer depends on your cash reserves and credit profile, not which loan sounds better on paper.
Most Siskiyou County borrowers I work with assume FHA is always cheaper because of the low down payment. That's true at closing, but the monthly mortgage insurance changes the math over time.
Conventional loans give you the cleanest exit from mortgage insurance. Once you hit 20% equity through payments or appreciation, PMI disappears and your monthly payment drops.
You'll need a 620 credit score minimum, though rates improve significantly at 680 and above. The 5% down option works for most buyers, but 10% down unlocks better pricing and removes some lender overlays.
FHA loans let you buy with 3.5% down if your credit score is 580 or higher. You'll pay an upfront mortgage insurance premium of 1.75% rolled into the loan, plus annual mortgage insurance that stays for the loan's life in most cases.
The credit flexibility matters in rural markets like Montague where recent life events may have dinged your score. FHA underwriters look at the full picture, not just a number.
The mortgage insurance structure separates these loans more than anything else. FHA charges 1.75% upfront plus 0.55% to 0.85% annually, and it never drops off. Conventional PMI costs 0.3% to 1.5% annually depending on your down payment and credit, but it cancels at 20% equity.
Credit scores create the other major split. Conventional pricing jumps at every 20-point tier below 740. FHA rates stay relatively flat across credit scores, making it the better deal for borrowers in the 580-680 range.
Choose FHA if your credit score sits below 680 or you need to preserve cash for repairs and reserves. The higher monthly payment matters less than getting into the property now, especially in a market where waiting might cost you more.
Go conventional if you have 680+ credit and can handle a slightly larger down payment. You'll pay less in total interest and escape mortgage insurance faster. On a 30-year horizon in Montague, conventional saves most borrowers $15,000 to $30,000 compared to FHA.
Yes, refinance to conventional once you hit 20% equity. This drops mortgage insurance and typically lowers your monthly payment by $150 to $300.
Conventional typically costs less at closing. FHA's 1.75% upfront insurance premium adds $3,500 on a $200,000 loan before you even start.
Most sellers don't care as long as you're approved. FHA appraisals are stricter on property condition, which can complicate older rural homes.
Rates improve significantly at 740 and max out around 780. Below 680, FHA usually offers better pricing despite the mortgage insurance.
FHA insurance cancels after 11 years with 10% down instead of never. Conventional still beats it for long-term savings at that down payment level.