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in Modesto, CA
Modesto buyers often land on one of two loan types: conventional or FHA. The right pick depends on your credit, your savings, and how long you plan to stay.
HousingWire flagged the 30-year fixed rate hitting 6.57% recently. That makes the cost gap between these two loan types more meaningful than it used to be.
Conventional loans are not government-backed. Lenders take on the risk, so they set tighter standards — but you get more flexibility on property type and loan structure.
Put 20% down and you skip private mortgage insurance (PMI) entirely. That saves you real money every month compared to FHA.
FHA loans are backed by the Federal Housing Administration. That backing lets lenders approve borrowers with lower credit scores and smaller down payments.
You can qualify with a 580 credit score and 3.5% down. Scores between 500 and 579 still qualify — but lenders require 10% down at that range.
Local decision guide
Use this comparison to weigh Conventional Loans and FHA Loans through local payment fit, eligibility, documentation, and timing before choosing a path in Modesto.
Modesto buyers often land on one of two loan types: conventional or FHA. The right pick depends on your credit, your savings, and how long you plan to stay.
HousingWire flagged the 30-year fixed rate hitting 6.57% recently. That makes the cost gap between these two loan types more meaningful than it used to be.
Conventional loans are not government-backed. Lenders take on the risk, so they set tighter standards — but you get more flexibility on property type and loan structure.
The biggest difference is mortgage insurance. FHA charges an upfront premium plus monthly MIP — and it does not cancel automatically on most loans.
Conventional PMI cancels once you hit 20% equity. FHA MIP on a 30-year loan with less than 10% down sticks for the full loan term.
If your credit score is above 700 and you have 5% or more saved, conventional almost always wins on total cost. The PMI is cheaper and it goes away.
FHA makes sense when your credit is in the 580-640 range or you had a bankruptcy or foreclosure in the past few years. It is a real path to ownership — not a fallback.
Yes. Once you build enough equity, you can refinance into a conventional loan and drop the MIP. Many Modesto buyers do this after a few years.
Both go as low as 3-3.5% down. FHA requires 3.5% at 580+. Conventional can go to 3% for qualified first-time buyers.
Conventional loans typically close faster. FHA requires a stricter appraisal process, which can add time in some cases.
FHA has a rehab option called the 203k. Conventional has similar programs, but FHA's version is more accessible for lower-credit borrowers.
Conventional requires 620 minimum. FHA goes down to 580 for 3.5% down, or 500 with 10% down.
Stanislaus County FHA limits apply here. Check with us — limits adjust periodically and affect what you can borrow with FHA.