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in Petaluma, CA
Petaluma buyers often face a real choice between conventional and FHA financing. Both work for single-family homes and condos in West Petaluma, downtown, and east side neighborhoods.
The right loan depends on your down payment savings and credit score. One option saves money long-term while the other gets you in with less cash upfront.
Conventional loans require 3-20% down and a credit score around 620 minimum. Most lenders prefer 640+ for the best rates.
You avoid mortgage insurance completely with 20% down. Below that, you pay PMI until you hit 20% equity, then it drops off automatically.
These loans offer the lowest rates for strong borrowers. You also get higher loan limits and more property type flexibility than FHA.
FHA loans accept 580 credit scores with 3.5% down. You can even qualify at 500 with 10% down, though few lenders go that low.
You pay 1.75% upfront insurance plus 0.55-0.85% annual premium. That annual premium stays for the loan's life if you put down less than 10%.
FHA works well for first-time buyers with limited savings. The flexible credit standards help borrowers who wouldn't qualify conventional.
Down payment math changes your decision. FHA at 3.5% down means $21,000 on a $600,000 Petaluma home versus $18,000 at 3% conventional.
Mortgage insurance hits harder with FHA. That lifetime 0.55% annual premium costs $275 monthly on a $580,000 loan and never drops off.
Credit score drives approval odds. Below 640, FHA becomes your best option despite higher insurance costs.
Choose conventional if your credit exceeds 680 and you have 5% or more saved. You'll pay less monthly and the PMI disappears at 20% equity.
Go FHA when your credit sits between 580-660 or your savings max out around 3.5% down. You'll pay more over time but you can actually get approved.
Run the numbers both ways before deciding. A slightly higher rate with FHA might cost less than waiting two years to improve your credit for conventional.
Yes, refinance to conventional once you hit 20% equity and your credit improves. That eliminates the lifetime FHA mortgage insurance.
Both take 30-45 days typically. FHA requires an additional appraisal review but rarely delays closing in practice.
Many do because FHA appraisals require stricter property conditions. Conventional financing often strengthens your offer slightly.
Most lenders require 640 minimum despite 620 guidelines. Below 660, expect higher rates and tighter debt ratios.
On a $580,000 loan, expect $265-410 monthly depending on your down payment. That's $3,180-4,920 annually that never goes away.