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One of the first decisions Texas first-time buyers face: FHA or conventional? Both are great tools — the right one depends on your credit, your down payment, and your longer-term plans. Here's the honest comparison.
What Is an FHA Loan?
An FHA loan is backed by the Federal Housing Administration. Because the government insures it, lenders can serve buyers with lower credit scores and smaller down payments — which is why FHA is a first-time-buyer favorite.
What Is a Conventional Loan?
A conventional loan isn't government-backed; it follows Fannie Mae and Freddie Mac guidelines. It generally asks for stronger credit but often costs less over the long run for well-qualified buyers.
Side-by-Side
- Minimum credit score: FHA 580 (3.5% down) or 500 (10% down) · Conventional typically 620+
- Minimum down payment: FHA 3.5% · Conventional as low as 3% on certain programs
- Mortgage insurance: FHA — required, and typically for the life of the loan with less than 10% down · Conventional — PMI only until you reach 20% equity, then removable
- Loan limits (2026, Harris County): FHA $541,287 · Conventional conforming $832,750
- Property standards: FHA appraisals are stricter · Conventional more flexible
- Debt-to-income: FHA allows higher ratios in some cases · Conventional typically caps lower
Mortgage Insurance Is the Big Difference
FHA charges an upfront mortgage insurance premium (1.75% of the loan) plus an annual premium — and with less than 10% down, that insurance typically stays for the life of the loan. Conventional PMI, by contrast, goes away at 20% equity. For buyers who can qualify conventionally, that difference often decides the long-run math.
When FHA Usually Wins
- Credit score below ~680
- Limited down payment savings
- Higher debt-to-income ratio
- Past credit events like collections or bankruptcy
FHA is more forgiving and gets more buyers into homes sooner.
When Conventional Usually Wins
- Credit score 700+
- 10–20% down available
- You want mortgage insurance to eventually disappear
- The property might not pass FHA's stricter appraisal
- The price exceeds FHA limits
Can You Switch Later?
Yes — plenty of buyers start FHA and refinance into conventional once equity and credit improve, dropping the FHA insurance premium along the way.
Not Sure Which Fits You?
This decision deserves real numbers, not internet generalities. I'll run both options against your actual credit, savings, and goals — no pressure, just the math. Book a free consultation.
Daisy Castro · NMLS #2592627 · Equal Housing Lender. This article is general information for Texas buyers — not financial, tax, or legal advice, and not a commitment to lend. Loan limits shown are 2026 Harris County figures and vary by county and year; programs and guidelines change. Figures current as of July 2026.
Daisy Castro
Mortgage Loan Officer
I help Houston families become homeowners. I speak English and Spanish.
NMLS #2592627 | Matador Lending