Government-Backed Loans: The Path to Homeownership in Bakersfield

For many buyers in Bakersfield and the greater Central Valley, government-backed loan programs are what make homeownership possible. In my experience, roughly 60 percent of the buyers I work with use either VA or FHA financing, and for good reason — these programs offer lower down payments, more flexible credit requirements, and competitive interest rates compared to conventional alternatives.

VA Loans: The Best Deal in Real Estate

If you are a veteran, active-duty service member, or eligible surviving spouse, a VA loan is almost always the optimal choice. Kern County has a significant military-connected population thanks to Edwards Air Force Base, the China Lake Naval Air Weapons Station, and numerous veterans who have chosen to settle in the affordable Central Valley after service.

Key VA Loan Benefits

• Zero down payment: This is the headline benefit. You can finance 100 percent of the home's value, meaning your only out-of-pocket costs at closing are the closing costs themselves (which the seller can also contribute toward).
• No private mortgage insurance (PMI): Conventional borrowers who put less than 20 percent down must pay PMI, which adds $100 to $300 per month. VA loans have no PMI at any loan-to-value ratio.
• Competitive interest rates: VA rates are typically 0.25 to 0.50 percent lower than conventional rates because the government guarantee reduces lender risk.
• Flexible credit standards: While the VA does not set a minimum credit score, most lenders require 580 to 620. This is significantly lower than the 680+ often needed for the best conventional rates.
• No prepayment penalty: You can pay off your VA loan early, refinance, or make extra payments without any fees.
• Assumable: VA loans can be assumed by a qualified buyer, which can be a powerful selling tool in a high-rate environment.

VA Loan Costs to Know

VA loans do carry a funding fee that ranges from 1.25 to 3.3 percent of the loan amount, depending on your down payment, service history, and whether it is your first VA loan. For a first-time VA buyer with zero down, the fee is 2.15 percent. On a $375,000 loan, that is approximately $8,062. The good news: this fee can be rolled into the loan amount, so you do not need to pay it out of pocket.

Veterans with a service-connected disability rating of 10 percent or more are exempt from the funding fee entirely, making the VA loan even more advantageous.

VA Loan Property Requirements

The VA requires that the home meet Minimum Property Requirements (MPRs), which ensure the property is safe, structurally sound, and sanitary. In Bakersfield, the most common MPR issues I encounter are:

• Peeling paint on homes built before 1978 (lead paint concern)
• Non-functional heating or cooling systems
• Roof with less than two years of remaining life
• Missing handrails on elevated porches or stairs

These are generally minor fixes, but they must be addressed before the VA appraiser will approve the property.

FHA Loans: Accessible Homeownership for Everyone

Federal Housing Administration loans are the most widely used government-backed option for non-military buyers. They are especially popular with first-time buyers in the Central Valley who have limited savings or credit challenges.

Key FHA Loan Benefits

• 3.5 percent down payment: With a credit score of 580 or higher, you need just 3.5 percent down. On a $350,000 Bakersfield home, that is $12,250.
• Credit scores as low as 500: Borrowers with scores between 500 and 579 can qualify with 10 percent down. This opens doors for buyers who have experienced credit challenges.
• Gift funds allowed: Your entire down payment can come from a family member's gift, making FHA ideal for buyers whose families want to help.
• Higher debt-to-income ratios: FHA guidelines allow DTI ratios up to 50 percent with compensating factors, compared to the 43 to 45 percent typical for conventional loans.
• Seller concessions up to 6 percent: The seller can contribute up to 6 percent of the purchase price toward your closing costs, compared to 3 percent on conventional loans with less than 10 percent down.

FHA Loan Costs to Know

FHA loans require mortgage insurance premiums (MIP) in two forms:

• Upfront MIP: 1.75 percent of the loan amount, rolled into the loan balance. On a $337,750 loan (after 3.5 percent down on $350,000), that adds approximately $5,910.
• Annual MIP: 0.55 percent of the loan balance per year, divided into monthly payments. On a $337,750 loan, that is approximately $155 per month.

For FHA loans originated with less than 10 percent down, MIP lasts for the life of the loan. The only way to remove it is to refinance into a conventional loan once you have 20 percent equity. This is an important long-term cost consideration.

CalHFA Programs: California-Specific Assistance

The California Housing Finance Agency offers several programs that pair with FHA and conventional loans to help with down payment and closing costs:

• MyHome Assistance Program: Provides a deferred-payment junior loan of up to 3.5 percent of the purchase price for FHA borrowers or 3 percent for conventional borrowers. This loan carries a simple interest rate and is due when you sell, refinance, or pay off the first mortgage.
• Zero Interest Program (ZIP): Offers a zero-interest, deferred-payment junior loan of up to 3 percent of the first mortgage amount for closing cost assistance.
• CalHFA FHA Program: A CalHFA-insured FHA first mortgage with a fixed interest rate, available to first-time homebuyers (or those who have not owned in the last three years).

Income limits apply — generally, your household income must be below the area median income limits, which in Kern County are approximately $80,000 to $95,000 depending on household size and specific program. Many working families in Bakersfield qualify.

VA vs FHA: Which Is Right for You?

If you are eligible for both, the VA loan wins in almost every scenario:

• Down payment: VA = 0%, FHA = 3.5%. Advantage VA.
• Mortgage insurance: VA = none (funding fee only), FHA = lifetime MIP. Advantage VA.
• Interest rates: VA rates are typically lower. Advantage VA.
• Credit flexibility: Both are flexible, slight advantage FHA for very low scores (500-579).
• Property restrictions: VA MPRs are slightly more stringent. Slight advantage FHA for older/as-is properties.

The only scenario where FHA might be preferred over VA is if the property cannot meet VA Minimum Property Requirements and the seller is unwilling to make repairs, or if the VA funding fee is high and you have no disability exemption.

Working With the Right Lender

Not all lenders are equally experienced with VA and FHA loans. I always recommend working with a lender who processes a high volume of government-backed loans and understands the specific appraisal and underwriting requirements. A lender unfamiliar with VA MPRs or FHA guidelines can delay or kill a transaction.

I maintain relationships with several Bakersfield-area lenders who specialize in VA and FHA lending and consistently close on time. When you work with me as your buyer's agent, I will connect you with the right financing partner for your situation.