✦ The Quick Answer
- FHA loan: Best for buyers with lower credit scores (580+) or smaller down payments (3.5%)
- Conventional loan: Best for buyers with strong credit (680+) who want to avoid lifetime mortgage insurance
- In SoCal: Most purchases above $1.1M require jumbo loans (neither FHA nor standard conventional)
- Either way: Portfolio Home Realty returns 1% cash back at closing regardless of loan type
FHA vs. Conventional — Full Comparison
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Min. credit score | 580 (3.5% down) / 500 (10% down) | 620 minimum; 680+ for best rates |
| Min. down payment | 3.5% | 3% |
| Mortgage insurance | Required for life of loan (most cases) | Required until 20% equity; then drops |
| Loan limit (CA 2025) | Up to $1,149,825 in high-cost counties | Up to $1,149,825 (then jumbo) |
| Property condition | Stricter (home must meet FHA standards) | More flexible |
| Debt-to-income ratio | Up to 57% with compensating factors | Typically max 45–50% |
| Seller concessions | Up to 6% | Up to 3% (with less than 10% down) |
| Works with PHR rebate? | ✅ Yes | ✅ Yes |
When FHA Makes Sense
- Your credit score is between 580–679
- You have limited savings and need the lowest possible down payment
- You've had a past bankruptcy or foreclosure (FHA has shorter waiting periods)
- Your debt-to-income ratio is above 45%
FHA downside to know: Mortgage Insurance Premium (MIP) is required for the life of most FHA loans. On a $700,000 FHA loan, that's roughly $500–$600/month in MIP — it never goes away unless you refinance into a conventional loan later.
When Conventional Makes Sense
- Your credit score is 680 or above
- You can put down at least 5–10%
- You want to avoid lifetime mortgage insurance
- You're buying a property that might not pass FHA inspection standards (older home, fixer-upper)
Conventional advantage: Once you reach 20% equity (through appreciation or payments), Private Mortgage Insurance (PMI) automatically drops — saving you $200–$500/month going forward.
The Jumbo Reality in Southern California
In 2025, the conforming loan limit in high-cost California counties is $1,149,825. Any loan above this is a jumbo loan — governed by private lender guidelines, not FHA or conventional standards.
This means: buying a $1.5M home in Newport Beach or Beverly Hills requires a jumbo loan — regardless of your preference for FHA or conventional. Jumbo loans typically require:
- Credit score of 700+
- 10–20% down payment
- 12+ months of cash reserves
- Debt-to-income ratio under 43%
How the PHR Rebate Works With Each Loan Type
Portfolio Home Realty's 1% rebate is compatible with FHA, conventional, and jumbo loans — but each has slightly different rules:
| Loan Type | Rebate Compatibility | Notes |
|---|---|---|
| Conventional | ✅ Full rebate | Applied to closing costs or as cash; if excess, reduces loan amount |
| FHA | ✅ Full rebate | Must be applied to closing costs first; excess reduces purchase price |
| Jumbo | ✅ Usually | Varies by lender — confirm with your loan officer |
Conventional is usually better if your credit score is 680+, because you avoid lifetime mortgage insurance. FHA is better if your credit score is below 680 or your DTI is high. Either way, Portfolio Home Realty's 1% rebate applies.
Technically yes, up to the $1,149,825 FHA limit in high-cost counties. But most homes in Newport Beach and Beverly Hills are above this, requiring a jumbo loan.
Bottom Line
Choose FHA if your credit is below 680 or your DTI is high. Choose conventional if you have good credit and want to avoid lifetime mortgage insurance. Get pre-qualified first — our partner iLoanCA can walk you through both options for free.
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