Most first-time buyers I work with end up looking at two loan types: an FHA loan or a conventional loan. People sometimes think FHA is “the first-time buyer loan” and conventional is for everyone else. That is not how it works.
Both can work for a first purchase. The better fit depends on your credit, your down payment, the house, and how long you plan to keep the loan.
I am not a lender. I work with Kaden Roller as a lender, and you can use your own. This page is the comparison I give in plain language so you know what to ask, not a promise that you will qualify for either one.
Down payment
FHA’s standard minimum down payment is 3.5% of the home’s value when you qualify for maximum financing. That 3.5% rule comes from FHA policy after the Housing and Economic Recovery Act of 2008, which required a cash investment of not less than 3.5% (HUD mortgagee letter on revised down payment requirements). Closing costs do not count toward that 3.5%.
Conventional loans can go as low as 3% down on some first-time or income-limited programs, such as certain Fannie Mae 97% options.
Those programs have their own rules. Fannie Mae's standard 97% option requires at least one first-time buyer, and its HomeReady option caps income at 80% of the area median (Fannie Mae 97% options). Homebuyer education may also be required. Ask your lender which 3% options they offer right now.
Credit score
HUD handbook guidance ties FHA financing to a decision credit score. If that score is 580 or above, the borrower is eligible for maximum financing.
If it is between 500 and 579, the borrower is limited to a maximum loan-to-value of 90%, which means a larger down payment (about 10%). Below 500, FHA-insured financing is not available under those rules. Source: HUD Handbook 4000.1.
Conventional loans no longer have one fixed minimum score. Fannie Mae removed its 620 minimum for loans run through Desktop Underwriter in November 2025 (Fannie Mae announcement). Lenders can still add their own stricter rules, and an FHA lender may require more than 580. Your pre-approval is the only score that matters for your offer.
Mortgage insurance
This is the part that changes the monthly payment in ways people do not expect. FHA loans charge an upfront mortgage insurance premium plus an annual premium. On many FHA loans that annual premium lasts a long time, sometimes for the life of the loan, depending on down payment and term.
Conventional loans charge private mortgage insurance (PMI) when you put down less than 20%, and PMI can usually be canceled once you reach the equity level the loan allows.
I am not going to invent a monthly insurance amount for you. The point is this: a slightly lower down payment on FHA can still cost more each month than conventional if the insurance is higher or lasts longer. Your lender should show both payments side by side.
The house itself
FHA loans have minimum property standards. A house that needs serious safety or livability repairs can be harder to buy with FHA, or it may need repairs before closing.
Conventional guidelines can be more flexible on condition, though the appraiser and the lender still have a say. If you are looking under $250K, this comes up a lot. I wrote about that in buying your first home under $250K.
How I help you choose
I do not pick the loan for you. I help you look at the house, the offer, and the timeline while your lender runs the numbers.
If you want help with cash to close, read Missouri down payment assistance. If you want the full cash list, see how much you need to buy.
The useful question is not “which loan is better.” It is “which loan gets you a payment you can live with, on a house that will appraise and pass inspection, without stretching you so thin that the first repair becomes a crisis.”
Questions I hear a lot
Is FHA only for first-time buyers?
No. First-time buyers use FHA often because the credit and down payment rules can be more flexible, but you do not have to be a first-time buyer to use it.
Is 3% down always better than 3.5%?
Not always. The monthly insurance and the interest rate can wipe out a small difference in down payment. Compare full payments, not just the cash due at contract.
Can I use gift money?
Often yes, with rules about who can give it and how it is documented. FHA and conventional do not treat gifts exactly the same. Your lender will tell you what they can use.
Should I wait to raise my score before I apply?
Sometimes waiting helps. Sometimes it just costs you time. A lender can tell you whether a small score change would actually change your pricing or your loan type.
If you are buying your first home, we can walk through it together.
No pressure to sign anything on the spot. Just a conversation about your budget, timeline, and what you actually want.