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FHA vs Conventional (2025): Which Lowers Your Payment?

Watch the full breakdown and see exactly how FHA and Conventional compare for your budget—including the monthly payment, PMI/MIP timeline, and cash-to-close.

  • Equal Housing Opportunity
  • Texas & Mortgage Licensed • TX RE Lic #700192 • NMLS #2103631
  • Serving Central Texas: Georgetown, Round Rock, Leander, Hutto, Cedar Park, Pflugerville, Austin suburbs

No hard credit pull to compare options.

What You’ll Learn

  • The plain-English difference between FHA and Conventional.
  • When FHA wins upfront (credit flexibility, 3.5% down, seller credits up to 6%, assumable loans).
  • When Conventional wins long-term (no upfront MI, PMI can drop).
  • How to compare using a Payment-First lens: monthly cost, PMI/MIP timeline, and cash-to-close.
  • Real-world scenarios, seller-credit math, and a practical refi strategy.

FHA at a Glance: Pros & Cons

FHA Pros

  • Lower credit-score flexibility; down payment as low as 3.5%
  • Gift funds allowed; may allow higher DTI
  • Seller credits up to 6% toward allowable costs
  • Assumable loan (future buyer may assume your rate)

FHA Cons

  • Upfront MIP + annual MIP (often lasts for life of loan if <10% down)
  • Stricter property condition in some cases
  • Primary residence only

No hard credit pull to compare options.

Conventional at a Glance: Pros & Cons

Conventional Pros

  • No upfront mortgage insurance
  • PMI can drop once you reach ~20% equity (by schedule or request/valuation)
  • Rewards stronger credit and larger down payments
  • More flexibility for second homes and some investment properties

Conventional Cons

  • More credit-score sensitive, you'll need a higher score
  • Has a lower DTI (debt-to-income) ratio
  • Must have more in reserves in most cases

Payment-First Fit Test (5 Questions)

  1. Payment: Which option produces the lowest total monthly cost (P&I + MI + taxes + insurance + HOA)?
  2. Time Horizon: Short hold → FHA may win. Longer hold → Conventional often wins when PMI drops.
  3. Credit Trajectory: Expect a score jump soon? Start with access now; plan to refi if it lowers total cost.
  4. Cash to Close: Need help? FHA allows seller credits up to 6% (within program limits).
  5. Property & Plans: Second home/investment or fixer? Conventional often fits better.

No hard credit pull to compare options.

About Alfonso Rodriguez

I’m Alfonso Rodriguez, a Real Estate & Mortgage Advisor serving Central Texas. I hold TX RE Lic #700192 and NMLS #2103631, so you get one advisor who understands both the home search and the financing strategy. My Payment-First approach lets you shop by monthly cost, not just sticker price—so you can buy with confidence.

Contact: Call/Text 512-809-0091

FAQs

Is FHA only for first-time buyers?

No. You can use FHA even if you’ve owned before—it just has to be your primary residence.

When does PMI go away on Conventional?

At ~78–80% LTV by schedule, or sooner if a new valuation supports it.

Can I switch later?

Yes—if it lowers total cost, we’ll time a refi once credit improves or equity builds.

Will checking my options hurt my credit?

We can start with soft-pull estimates and documents you provide; a hard credit pull may be required later to lock terms.

Can seller credits lower my cash-to-close?

Yes—within program limits. FHA allows up to 6% toward allowable costs.

What areas do you serve?

Central Texas: Georgetown, Round Rock, Leander, Hutto, Cedar Park, Pflugerville, and Austin suburbs.

No hard credit pull to compare options.

Equal Housing Opportunity. Not a commitment to lend. All loans subject to credit, income, property, and full underwriting approval. Terms and program rules may change without notice. TX RE Lic #700192 • NMLS #2103631.

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