FHA or conventional — which is better for your North Texas home purchase? Both are excellent programs built for different situations. Here’s a clear, honest comparison.
The Core Difference
FHA loans are backed by the Federal Housing Administration and designed for buyers with lower credit scores or smaller down payments. Conventional loans are backed by Fannie Mae or Freddie Mac and typically offer better long-term terms for buyers with stronger credit.
Side-by-Side Comparison
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Min. down payment | 3.5% | 3% |
| Min. credit score | 580 (3.5% down) | 620 |
| Mortgage insurance | Required for life of loan (<10% down) | Cancellable at 20% equity |
| Upfront MIP | 1.75% of loan amount | None |
| DTI limits | Up to 57% in some cases | Typically 45–50% |
| Loan limits (2026) | $524,225 (most TX counties) | $806,500 (conforming) |
When FHA Makes More Sense
- Your credit score is between 580–659
- You have a higher debt-to-income ratio
- You want the lowest possible down payment
- You’ve had a past bankruptcy or foreclosure
When Conventional Makes More Sense
- Your credit score is 700 or higher
- You can put 5–20% down
- You want to cancel mortgage insurance in the future
- You’re buying above FHA loan limits in Frisco, TX or McKinney, TX
The Mortgage Insurance Cost Difference
FHA charges an annual MIP of 0.55% — on a $400,000 loan that’s $183/month added forever (if under 10% down). Conventional PMI might be $100–$140/month and cancels when you reach 20% equity. Over 10 years that difference can exceed $15,000.
Bottom Line for North Texas Buyers
There’s no universally better loan — it depends on your credit score, savings, and how long you plan to stay. The best move is to compare both programs side by side with real numbers. That’s exactly what I do for every buyer across Collin County, Denton County, Grayson County, and North Texas.
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Homewood Mortgage, LLC | NMLS #294974 | Wayne Wallace NMLS #745186 | Licensed in Texas | This is not a commitment to lend. Loan approval subject to credit, income, and property qualification. Programs, rates, and terms subject to change without notice.