FHA vs. Conventional Loans: What First-Time Buyers Need to Know

Brett Ebbighausen
Apr 16
3 min read

Updated: Apr 28

If you're buying your first home, chances are you're trying to figure out which loan is right for you: FHA or Conventional? Maybe you’ve heard those terms thrown around by a friend, your real estate agent, or even your favorite mortgage TikTok — but you’re still not totally sure what they mean or how they affect you.

That’s where I come in.

As a licensed mortgage broker and owner of Prestige Home Loans, I’ve helped hundreds of first-time homebuyers in the Boston area navigate this exact decision — and my goal is to break it down in a way that’s clear, real, and tailored to your situation. Let’s get into it.

What is an FHA Loan?

FHA stands for Federal Housing Administration. An FHA loan is a government-backed mortgage designed to help people who:

✔️ Have lower credit scores

✔️ Don’t have a huge down payment saved

✔️ Are buying their first home

Pros

✅ Down payment as low as 3.5%

✅ Easier to qualify with credit scores as low as 580

✅ Flexible underwriting guidelines

✅ Can use gift funds for the down payment

Things to consider:

❌ You’ll pay upfront and monthly mortgage insurance (MIP) — no matter how much you put down

❌ Loan limits (can vary by county)

❌ Slightly stricter property requirements (for example, fixer-uppers may not qualify)

What is a Conventional Loan?

A conventional loan isn’t backed by the government. It’s a loan offered by private lenders and typically conforms to guidelines set by Fannie Mae and Freddie Mac.

Pros:

✅ May offer lower monthly payments (especially with a good credit score)

✅ You can cancel mortgage insurance once you reach 20% equity

✅ Great for borrowers with strong credit and a stable income

✅ More flexible on property types in some cases

Things to consider:

❌ Higher credit score and down payment usually required (minimum ~620+)

❌ PMI (Private Mortgage Insurance) is still required if you put down less than 20%

❌ May be harder to qualify for if you have high debt or variable income

So... Which One Is Right for You?

FHA vs Conventional loans...Let’s break it down based on your situation.

If You...	FHA Might Be Better	Conventional Might Be Better
Have lower credit (under 680)	✅	❌
Have limited savings	✅ (3.5% down)	✅ (some 3% down options, but stricter)
Plan to stay in your home long-term	✅	✅
Want lower monthly payments	❌ (due to MIP)	✅ (if credit is strong)
Want to remove mortgage insurance later	❌	✅

Still not sure? That’s completely normal — and this is where working with a mortgage broker really pays off. At Prestige, I can run side-by-side loan comparisons for you and show you the exact monthly payments, upfront costs, and long-term savings for each scenario.

Pro Tip: You Don’t Have to Decide Alone

A big part of my job as your mortgage broker is to help you understand your options, not overwhelm you with them. I’ll look at your full financial picture — credit, income, savings, timeline, and goals — and help you make a decision that fits you, not some cookie-cutter borrower profile.

I’m here to simplify, support, and guide you — from first application to final closing.