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in Sonora, CA
Sonora homebuyers face a classic choice: conventional or FHA financing. Each loan type serves different borrowers with distinct credit profiles and down payment capabilities.
Your credit score and available cash dictate which option saves you money. FHA accepts lower credit but charges mortgage insurance for life on many deals, while conventional demands stronger qualifications upfront.
Conventional loans require 620+ credit and stronger debt-to-income ratios. You'll need proof of stable income and clean payment history for the past two years.
Put down 20% and you skip mortgage insurance entirely. Below 20%, you'll pay PMI monthly until you reach 20% equity, then it drops off automatically.
These loans cap at $806,500 in Tuolumne County for 2024. Rates run lower than FHA for borrowers above 680 credit, especially with larger down payments.
FHA backs loans for 580+ credit with just 3.5% down. You'll pay 1.75% upfront mortgage insurance plus 0.55-0.85% annually for most loan terms.
Debt ratios stretch to 50% with compensating factors. Sellers can contribute up to 6% toward your closing costs, versus 3% on conventional deals.
The catch: mortgage insurance never drops off on loans over 90% LTV with terms exceeding 15 years. You're stuck with that monthly cost unless you refinance.
Credit drives the biggest divide. Conventional shuts you out below 620, while FHA opens doors at 580 with just 10% down or 500 with 10% down through some lenders.
Mortgage insurance costs flip depending on your loan-to-value ratio. FHA charges higher upfront fees and permanent monthly premiums. Conventional costs more monthly when you're above 90% LTV but disappears at 78% equity.
Property standards matter more with FHA. Their appraisers flag peeling paint, broken handrails, and roof issues that conventional appraisers might note but not require fixing before closing.
Go FHA if your credit sits below 680 or you're scraping together 3.5-5% down. The upfront insurance sting hurts less than getting denied, and you can refinance to conventional once you build equity and boost your score.
Choose conventional with 10%+ down and 700+ credit. You'll pay less monthly and shed mortgage insurance faster. The rate advantage compounds over time, saving thousands across a 30-year term.
Run both scenarios with actual numbers. I've seen Sonora buyers convinced FHA was their only option discover conventional costs $150 less monthly once we account for PMI differences.
Yes, once you hit 20% equity and 620+ credit. Refinancing drops the FHA mortgage insurance and usually lowers your rate if your credit improved.
Conventional typically closes 3-5 days quicker. FHA appraisals take longer due to stricter property condition requirements that may need repairs.
Most do, but FHA can reject properties on well water or septic without proper certifications. Conventional shows more flexibility with rural land features.
740+ unlocks top-tier pricing. Every 20-point drop below that costs roughly 0.25% in rate or equivalent points at closing.
No, FHA requires owner occupancy. You need conventional financing for any property you won't live in as your primary residence.