FHA vs. Conventional: Which Loan Is Right for You?

One of the most common questions we hear is: "Should I go FHA or conventional?" Both are great options, but they serve different needs. Here's a straightforward breakdown.

Down Payment

FHA loans require a minimum of 3.5% down. Conventional loans can go as low as 3% down for qualified buyers. If down payment is your primary concern, conventional loans may actually offer a slight edge — but FHA loans tend to be more flexible on credit requirements.

Credit Score Requirements

FHA loans are more forgiving when it comes to credit. You may qualify with a score as low as 580 (or even 500 with a 10% down payment). Conventional loans typically require a minimum score of 620, and you'll get better rates with scores above 740.

Mortgage Insurance

This is often the deciding factor. FHA loans require mortgage insurance for the life of the loan (unless you put 10%+ down, in which case it drops off after 11 years). Conventional loans require private mortgage insurance (PMI) only if you put less than 20% down — and it can be removed once you reach 20% equity.

Loan Limits

Both FHA and conventional loans have limits that vary by county. In most areas, conventional conforming loan limits are higher than FHA limits, giving you more purchasing power.

Which Should You Choose?

If you have a lower credit score or limited savings, FHA may be the better path. If you have strong credit and want to avoid long-term mortgage insurance, conventional is likely the way to go. The best answer depends on your specific situation.

Want to talk through your options? Contact us or call 512.657.1333 — we'll help you figure out the best fit.