“Should I get an FHA or conventional loan?” It’s the most common question Texas buyers ask me after credit score and down payment. The honest answer: it depends entirely on your numbers. This guide walks through every meaningful difference so you can make the right call for your situation — not a generic recommendation.
The Quick Answer: Side-by-Side Comparison
When FHA Wins for Texas Buyers
FHA is the right call in four specific situations. First, if your credit score is below 620. Conventional loan programs start getting expensive — or unavailable — below that threshold. FHA keeps the door open at 580 and offers meaningful rates even in the 580–619 band.
Second, if you’ve had a recent credit event. Just two years after Chapter 7 bankruptcy discharge or three years after a foreclosure, you can qualify for FHA. Conventional requires four to seven years for the same events. For Texas buyers getting back on their feet, that’s a significant difference.
Third, if you’re stacking Texas down payment assistance. Programs like TSAHC’s Home Sweet Texas and TDHCA’s My First Texas Home are explicitly designed to pair with FHA. The 3.5% down requirement is fully covered by most DPA grants — meaning many Texas FHA buyers bring zero cash to closing. See our full guide on Texas FHA loans for the complete DPA breakdown.
Fourth, if you have a high debt-to-income ratio. FHA allows DTI up to 43% (sometimes higher with compensating factors), and is generally more forgiving of student loans, car payments, and other monthly obligations than conventional underwriting.
🏛️ FHA Is Often the Better Starting Point for Texas First-Time Buyers
The most common situation we see: a buyer with a 600 credit score and $8,000 saved who qualifies for a TSAHC grant. FHA is the only program that makes that work. A conventional loan at 600 would carry PMI costs significantly higher than FHA’s MIP — and might not be approved at all.
When Conventional Wins for Texas Buyers
Conventional becomes the clear winner once your credit score clears 680 — and especially above 720. At that point, conventional PMI rates drop dramatically, and the long-term math starts tilting away from FHA’s permanent MIP.
The most important long-term advantage: conventional PMI automatically cancels when you hit 20% equity. If you put 5% down on a $350,000 Texas home, you’d eliminate PMI once you reach ~$70,000 in equity — typically in 8–10 years at normal appreciation rates. FHA’s MIP, if you put less than 10% down, stays for the life of the loan. The only way to remove it is to refinance into conventional.
Conventional also has higher loan limits — $806,500 for a conforming loan in 2026 vs. FHA’s $524,225 for most Texas counties. If you’re buying in the $550K–$800K range in Austin, DFW, or Houston’s premium submarkets, conventional is often the only option that covers your purchase.
Finally, conventional offers more flexibility on property type. FHA requires the home to pass a stricter appraisal — “safe, sound, and sanitary.” Fixer-uppers, homes with deferred maintenance, and certain condo projects that don’t meet FHA approval standards often require conventional financing. Learn more about Texas conventional loans.
Running the numbers side-by-side is the only way to know which loan saves more over time
The Mortgage Insurance Math: A Real Texas Example
This is where most comparisons fall short. Let’s run the real numbers on a $300,000 Texas home with 5% down ($15,000):
🏛️ FHA — 620 Credit Score
🏠 Conventional — 680 Credit Score
At a 620 credit score, conventional PMI would be even higher — closer to $200–$230/month. In that scenario, FHA’s MIP is actually cheaper monthly, even though it doesn’t cancel. The break-even point shifts dramatically based on your credit score. This is exactly the kind of analysis we run for every client before making a recommendation.
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🏛️ FHA vs. Conventional — Let’s Run Your Numbers
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Credit Score Tipping Points: Where the Math Changes
Credit score is the single biggest variable in FHA vs. conventional. Here’s how the math shifts across the most common score ranges Texas buyers present with:
Texas-Specific Considerations
A few things that make the FHA vs. conventional decision unique in Texas. First, Texas’s down payment assistance ecosystem is heavily optimized for FHA. TSAHC and TDHCA both have FHA-specific programs that provide non-repayable grants covering the entire 3.5% down payment. Conventional DPA options exist but are less generous and more restrictive.
Second, Texas has some of the highest property taxes in the nation — averaging 1.6–2.2% annually depending on county. That increases your total housing payment relative to the loan, which affects how much mortgage insurance cost matters as a percentage of your total spend.
Third, in military-heavy markets like San Antonio, Killeen, and El Paso, a significant portion of buyers qualify for VA loans — which beat both FHA and conventional in most scenarios for eligible veterans. If you served, always check VA eligibility before choosing between FHA and conventional. See our full Texas first-time homebuyer guide for the complete program comparison.
The right loan choice puts Texas buyers in their home faster — and saves thousands over the life of the mortgage
FAQ: FHA vs. Conventional in Texas
Can I switch from FHA to conventional after closing?
Yes — refinancing from FHA to conventional is one of the most common strategies we recommend once a buyer builds 20% equity. It eliminates MIP entirely. Timing depends on your market’s appreciation rate and your rate environment at the time.
Is FHA always cheaper upfront than conventional?
Not necessarily. FHA charges a 1.75% upfront MIP that gets rolled into the loan — effectively increasing your loan balance. Conventional has no upfront PMI. On a $300,000 loan, FHA’s upfront MIP adds about $5,250 to your principal. That said, FHA often allows a lower down payment, making the out-of-pocket startup cost lower.
Which loan is easier to get approved for in Texas?
FHA has more flexible underwriting across the board — lower credit score thresholds, higher DTI allowances, shorter waiting periods after credit events, and 100% gift funds allowed. For buyers with any credit complexity, FHA is the more accessible path.
Do Texas sellers prefer FHA or conventional offers?
In competitive Texas markets, sellers sometimes prefer conventional offers because FHA appraisals have stricter property condition requirements — meaning the seller may need to fix issues conventional lenders would overlook. This matters most in as-is or older home purchases. In normal market conditions, both are equally accepted.
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We compare FHA and conventional side-by-side with your real numbers — credit score, income, down payment, and Texas market — and recommend the option that saves you the most money over time.
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Adam Bartling & Team
Loan Officer · NMLS# 2213358
Retired Army Captain. Texas mortgage specialist with deep experience in FHA, VA, and conventional loan programs. Licensed through Movement Mortgage (NMLS# 39179). Serving Texas & 30+ states.
Adam Bartling & Team | NMLS# 2213358 | Movement Mortgage NMLS# 39179 | Licensed in Texas & 30+ States. Not a commitment to lend. All loans subject to credit approval.