Should a first-time buyer choose FHA or conventional?
If your credit score is 700+ and you plan to stay 7+ years, conventional wins because PMI drops off at 20% equity, saving you $25,000-$35,000 over the life of the loan. If your score is 580-660, FHA is typically cheaper monthly because conventional PMI penalizes lower credit scores heavily. Both work with Florida down payment assistance for $0 out of pocket.
The Head-to-Head Comparison Table
Here is every major difference between FHA and conventional loans on a $350,000 Tampa Bay home purchase:
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Down Payment | 3.5% ($12,250) | 3% ($10,500) |
| Min Credit Score | 580 (3.5% down) | 620 |
| Upfront Insurance | 1.75% UFMIP ($6,125) | None |
| Monthly Insurance | 0.55% annual (~$160/mo) | 0.3-1.5% (credit-dependent) |
| Insurance Duration | Life of loan | Drops off at 20% equity |
| Loan Limit (2026) | $498,257 | $806,500 |
| Max DTI | Up to 56.9% | Up to 50% |
| Seller Concessions | Up to 6% | 3% (with <10% down) |
| Income Limits | None | None (Conv 97) / 80% AMI (HomeReady) |
| DPA Compatible | Yes (Hometown Heroes, Chenoa) | Yes (HFA Preferred, bank grants) |
| Condo Restrictions | FHA-approved list required | Fewer restrictions |
When Does FHA Win?
FHA is the better choice when:
- Credit score 580-659: FHA's flat-rate MIP does not penalize lower scores the way conventional PMI does. At 620 credit, conventional PMI can cost 2-3x more monthly.
- Higher DTI: FHA allows debt-to-income ratios up to 56.9% with compensating factors, versus conventional's 50% cap. If you have student loans or car payments, FHA stretches further.
- Seller concessions needed: FHA allows up to 6% seller concessions, double conventional's 3% limit for low-down buyers. In a buyer's market, this covers most or all closing costs.
When Does Conventional Win?
Conventional is the better choice when:
- Credit score 700+: Your PMI rate drops below FHA MIP from day one, AND it disappears entirely at 20% equity. Over 30 years, that saves $25,000-$35,000.
- Buying a condo: Conventional has far fewer condo complex restrictions. FHA requires the complex to be on its approved list or qualify for single-unit approval.
- Loan amount above $498,257: FHA tops out at $498K in Tampa Bay. Conventional goes to $806,500 before hitting jumbo territory.
- Plan to stay 7+ years: The PMI drop-off at 20% equity delivers massive long-term savings that compound over time.
The 30-Year Cost Difference on a $350,000 Home
Lifetime Cost Comparison (700 Credit Score)
Assumes 3% annual appreciation, 700 credit, $350K purchase. Your numbers will vary.
Not sure which loan type saves you more?
Barrett's lenders run both FHA and conventional side-by-side — you pick the one that costs less. Free, no obligation.
The Smart Strategy: Start FHA, Refinance to Conventional
Many savvy first-time buyers use FHA to get in the door (lower credit requirements, higher DTI allowance, more seller concessions) and then refinance to conventional once they hit 20% equity. With Tampa Bay's 3-5% annual appreciation, that often happens in 5-7 years. You get the easiest entry point today AND the lowest long-term cost tomorrow.
How Down Payment Assistance Changes the Equation
Both loan types work with Florida DPA programs, but the best pairings differ:
- FHA + Hometown Heroes: Heroes gives 5%, FHA needs 3.5% — you keep the surplus for closing costs. Most popular combo.
- Conventional + HFA Preferred Plus: Up to 5% forgivable after 5 years. Lower long-term cost because PMI drops off.
- Either + Chenoa Fund: No income limits, no first-time buyer requirement. Works when state programs are tapped out.
Related Comparisons and Programs
- FHA vs VA Loan — which is better for military buyers?
- VA vs USDA — comparing the two zero-down options
- FHA Loan + DPA Stacking
- Conventional 3% Down
- Hometown Heroes
- HFA Preferred Plus
Helpful Resources
Frequently Asked Questions
Is FHA or conventional better for a 680 credit score?
At 680, both options are viable but conventional typically wins. Conventional PMI at 680 is roughly comparable to FHA MIP, but conventional PMI drops off at 20% equity while FHA MIP stays for the life of the loan. Over 30 years, that difference saves you $25,000-$35,000. If your score is below 660, FHA is usually the better deal because conventional PMI becomes very expensive at lower scores.
Can I use down payment assistance with both FHA and conventional?
Yes. Florida Hometown Heroes, HFA Preferred Plus, Chenoa Fund, and several other programs work with both loan types. FHA pairs with Hometown Heroes for up to 5% in assistance. Conventional pairs with HFA Preferred Plus for forgivable assistance. Barrett matches you with the best combo for your situation.
Which loan type has higher closing costs?
FHA has slightly higher closing costs due to the 1.75% upfront mortgage insurance premium (UFMIP), which is usually rolled into the loan amount. On a $350,000 loan, that adds $6,125 to your balance. Conventional has no upfront MI fee. However, FHA allows seller concessions up to 6% versus conventional's 3% limit for low-down buyers, which can offset the difference.
What is the FHA loan limit for Tampa Bay in 2026?
The 2026 FHA loan limit for a single-family home in Hillsborough, Pinellas, and Pasco counties is $498,257. Conventional conforming limits are higher at $806,500. If you need a loan above the FHA limit, conventional is your only option without going jumbo.
Can I refinance from FHA to conventional later?
Yes, and many buyers plan on this from day one. Once you reach 20% equity through payments and appreciation (typically 5-7 years in Tampa Bay), refinancing to conventional eliminates your mortgage insurance entirely. Barrett recommends setting a calendar reminder to check your equity annually starting in year 3.
Let Barrett run both scenarios for your budget
FHA vs conventional side-by-side with your real numbers. Free, no credit pull.
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