FHA vs Conventional Loan: Which One Is Right for You?

FHA or conventional. It is one of the most common questions we get, and the answer is not the same for everyone. Here is a straight comparison so you can figure out which one makes sense for your situation.

The Basics

FHA loans are backed by the Federal Housing Administration. That government backing allows lenders to approve borrowers with lower credit scores and smaller down payments. Conventional loans are not government-backed. They follow guidelines set by Fannie Mae and Freddie Mac and typically require stronger credit.

Down Payment

FHA requires as little as 3.5% down if your credit score is 580 or higher. Conventional loans can go as low as 3% down for certain programs, but you generally need a stronger credit profile to get there. Most conventional buyers put down 5% to 20%.

Credit Score Requirements

FHA accepts scores as low as 580 for the 3.5% down option, and down to 500 with 10% down. Conventional requires a minimum of 620, and your rate improves meaningfully as your score goes up. If your score is 740 or higher, conventional usually gives you the best rates available.

Mortgage Insurance

This is where FHA hurts over the long term. FHA has two types of mortgage insurance: an upfront premium of 1.75% of the loan amount, which is rolled into the loan, and an annual premium that gets added to your monthly payment. If you put less than 10% down on an FHA loan, that annual premium stays for the life of the loan. On a conventional loan, PMI (private mortgage insurance) is required when you put less than 20% down, but it cancels automatically once you reach 20% equity. That is a big difference.

Loan Limits in Colorado for 2026

FHA loan limits in most Colorado counties for a single-family home are $524,225 in 2026. In high-cost areas like Denver and Boulder counties, the limit is higher, up to $833,750. Conventional loan limits follow the conforming limit, which is $806,500 in 2026 for most of the country. Jumbo loans cover anything above that.

How Sellers See It

In Colorado's competitive market, some sellers and listing agents prefer conventional offers. FHA loans come with an appraisal that includes condition requirements. If the home has issues, the deal can get complicated. Conventional appraisals are less strict. It is not a dealbreaker, but it is worth knowing if you are shopping in a multiple-offer situation.

So Which One Should You Choose?

Pick FHA if: your credit score is under 660, you have limited savings, or you have had past credit issues and need the more flexible underwriting.

Pick conventional if: your score is 680 or higher, you can put at least 5% down, and you want the flexibility of removing mortgage insurance down the road.

We work with both every day. We will look at your full picture and tell you which one saves you more money in your specific situation.