Choosing between FHA and conventional loans in San Diego depends on your credit score, down payment, and financial goals. FHA loans offer flexibility for first-time buyers with smaller down payments, while conventional loans may be better for those with strong credit and larger savings. Local guidance from a San Diego mortgage broker ensures you get the best fit for your situation.
Finding the Right Loan Starts with Understanding Your Options
Hi, I’m Trevor Sanders, owner of SD-Loans, your trusted mortgage broker in San Diego. Every week, I meet homebuyers who ask the same question:
“Should I go with an FHA loan or a conventional loan?”
It’s a great question—and one that can make a big difference in your long-term costs and buying power.
In this post, I’ll break down how each loan works, what their differences mean for San Diego homebuyers, and how to decide which fits your goals best.
“There’s no one-size-fits-all loan. My job is to help you see the full picture so you can make a confident, informed decision.”
— Trevor Sanders, Owner of SD-Loans
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What Is an FHA Loan?
An FHA loan is a mortgage backed by the Federal Housing Administration. It’s designed to help first-time buyers or those with limited savings or credit challenges buy a home.
Key highlights:
- Down payments as low as 3.5%
- Credit scores as low as 580 may qualify
- More flexible debt-to-income ratios
- Government-backed security for lenders
Because the FHA insures the loan, lenders can approve buyers who might not qualify for conventional financing.
Learn more about FHA financing at FHA Mortgage Loans San Diego.
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What Is a Conventional Loan?
A conventional loan is not insured by the government. These loans are offered by private lenders and typically require:
- Higher credit scores (620 or above)
- At least 3%–5% down payment
- Stricter debt-to-income requirements
However, buyers with good credit often benefit from lower mortgage insurance costs and more flexibility in property type and loan amount.
Conventional loans can also remove Private Mortgage Insurance (PMI) once you reach 20% equity—something FHA loans cannot easily do.
- FHA vs. Conventional Loans: Key Differences at a Glance
| Feature | FHA Loan | Conventional Loan |
| Down Payment | 3.5% minimum | 3%–20% depending on credit |
| Credit Score | 580+ (500–579 w/ 10% down) | 620+ |
| Mortgage Insurance | Required for life of loan (MIP) | Required if <20% down (can be removed) |
| Debt-to-Income Ratio | More flexible | Stricter |
| Best For | First-time buyers, limited savings | Strong credit, long-term owners |
| Loan Limits (San Diego) | Up to $1,209,750 (2025) | Up to $1,149,825 (conforming) |
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FHA Loans in San Diego: A Closer Look
San Diego’s home prices can feel intimidating for first-time buyers. FHA loans help bridge that gap by offering easier qualification and a low down payment.
Why FHA loans work well here:
- Many first-time buyers in North Park, Chula Vista, and Clairemont use FHA programs to get started.
- You can combine gift funds from family toward your down payment.
- FHA loans can be used on condos (if the complex is FHA-approved).
These programs make it possible for San Diegans to buy sooner—without waiting years to save for 20%.
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Conventional Loans: A Smart Move for Buyers with Strong Credit
If you’ve built a solid financial foundation, a conventional mortgage might save you more in the long run.
Advantages:
- No upfront mortgage insurance premium
- Option to remove PMI once you hit 20% equity
- Competitive interest rates for high credit scores
- More flexibility with property types (multi-family, investment)
Many of my clients upgrading from their starter homes in Oceanside or Mission Valley choose conventional financing for their second purchase because it provides more control and lower long-term costs.
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Loan Limits: Why They Matter in San Diego
Home prices in San Diego County continue to rise. For 2025, the limits are:
- FHA Loan Limit: $1,209,750
- Conventional (Conforming) Limit: $1,149,825
If your target home exceeds those limits, you may need a jumbo loan—but there are FHA and conventional jumbo options too.
Local brokers like me can help compare your scenarios to ensure you’re choosing the smartest path.
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The Role of Mortgage Insurance
Here’s one of the biggest differences between FHA and conventional financing:
FHA Loans:
- Require an upfront Mortgage Insurance Premium (UFMIP) of 1.75%.
- Require monthly insurance (MIP) for the life of the loan, unless you refinance.
Conventional Loans:
- Require PMI only if your down payment is below 20%.
- PMI can be canceled once you reach 20% equity.
In other words: FHA may be easier to qualify for, but conventional loans can save you more long term if you plan to stay in your home for many years.
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Example: Which Loan Fits Best?
Scenario 1: First-Time Buyer in Chula Vista
- Credit score: 610
- Down payment: 3.5%
- FHA loan fits best—easier qualification and lower barrier to entry.
Scenario 2: Repeat Buyer in Encinitas
- Credit score: 740
- Down payment: 10%
- Conventional loan likely better—no lifetime mortgage insurance and lower monthly cost.
Each buyer’s situation is unique. That’s why my team takes time to run side-by-side comparisons, showing the total cost of each option before you decide.
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Local Market Tip: FHA Is a Great Entry Point in San Diego
While FHA loans used to carry a stigma, that’s changing fast in Southern California.
Local realtors understand that FHA buyers are qualified, reliable, and backed by secure lending programs.
I often help buyers get FHA-approved offers accepted, even in competitive neighborhoods like La Mesa, University Heights, and Rancho Bernardo—especially when paired with strong pre-approval and quick lender communication.
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Common Misconceptions About FHA Loans
“FHA loans take longer to close.”
Not true with the right lender. At SD-Loans, we regularly close FHA loans in 21–25 days.
“Sellers don’t like FHA buyers.”
Also false. Sellers care most about qualified buyers and quick closings—both of which we deliver.
“FHA loans are only for low-income buyers.”
Absolutely not. FHA loans are for anyone who wants flexible terms and manageable down payments. I’ve helped buyers earning six figures choose FHA because it simply made sense for their goals.
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Refinancing Options for FHA and Conventional Loans
FHA Streamline Refinance
If you already have an FHA loan, you can refinance with minimal paperwork and no new appraisal to lower your rate.
Conventional Refinance
If your credit improves or you build equity, refinancing into a conventional loan can help you eliminate FHA mortgage insurance.
Many of my clients in Scripps Ranch and Poway have saved hundreds per month through smart refinancing strategies.
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How to Decide Which Loan Type Is Right for You
Ask yourself:
– What’s my credit score?
– How much do I have saved for a down payment?
– How long do I plan to stay in this home?
If you’re unsure, that’s where I come in. I’ll analyze both options and help you see the real difference in payment, insurance, and equity over time.
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The SD-Loans Advantage
At SD-Loans, we simplify the process with:
- Fast online pre-approvals
- Local underwriting for quicker closings
- Personal communication from start to finish
You’re not a file number—you’re part of our community. I’ve met clients at Better Buzz Coffee in Hillcrest or near Liberty Station to walk through their loan options in person.
Buying a home in San Diego is a big decision. You deserve local expertise to make it easy and stress-free.
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Next Steps for San Diego Buyers
Ready to compare FHA vs. conventional loan options?
I’ll show you which one saves you more—side by side, with real numbers.
Start today:
Visit FHA Mortgage Loans San Diego
Or explore How to Qualify for a Mortgage in San Diego
“Every buyer deserves a clear, honest look at their options. My role is to simplify the numbers so your decision feels easy.”
— Trevor Sanders
Call/Text (619) 855-5061 to start your pre-approval today.
