Conventional or FHA? What First-Time Buyers Actually Need to Know

September 14, 2026 By Rich Jones

A client called me a few months ago, set on FHA. She’d heard it was “the first-time buyer loan” and figured that settled it. By the time we ran her numbers, conventional saved her more over the life of the loan. That’s not because FHA is a bad option. It’s because the right loan depends on the person, not on a label.

FHA: lower barrier to entry, insurance that sticks around

FHA loans exist to make homeownership more reachable. Credit score minimums are often lower than on conventional loans, and you can get in with as little as 3.5% down.

The trade-off is mortgage insurance. On many FHA loans, that insurance doesn’t go away once you reach 20% equity the way it does on a conventional loan. You’d often need to refinance out of FHA to drop it. That’s not a dealbreaker, but it’s a cost worth knowing about before you sign, not after.

Conventional: a little pickier, but insurance you can shed

Conventional loans can also go as low as 3% down for qualifying buyers, which surprises people who assume conventional always means 20% down. The credit bar is often a bit higher than FHA’s, but once you reach 20% equity, private mortgage insurance can come off. That can mean real savings over time, especially if your home appreciates.

What most people skip: down payment assistance

Here’s where the conversation usually stalls. Buyers hear “3% down” or “3.5% down” and still don’t see a path to it. That’s where down payment assistance programs come in. These are typically state, county, or local programs that pair with an FHA or a conventional loan to cover part or all of the down payment, and sometimes closing costs too.

Eligibility varies by program. Some are income-capped, some are limited to first-time buyers (which often just means you haven’t owned a home in the last three years, not literally never), and some are tied to specific loan types. It’s not one-size-fits-all, which is exactly why it’s worth a real conversation instead of guessing from a blog post or a Facebook comment.

So which one is right for you?

Genuinely, it depends. Your credit score, how much you have saved, how long you plan to stay in the home, and what assistance programs you’re eligible for all factor in. I’ve had clients where FHA was clearly the better move, and clients where conventional plus a local assistance program beat FHA outright. You can also browse my loan programs for an overview.

If you’re early in the process and trying to figure out which lane you’re in, contact me and tell me your situation. I’ll run the numbers both ways and give you a straight answer, even if that answer is “let’s wait six months and get your credit in better shape first.”

— Rich Jones

Note: Rates, fees, and program guidelines change often and depend on your credit, income, and property. This post is general education, not a Loan Estimate or a commitment to lend. Contact me for numbers that fit your situation.