A $400,000, 30-year fixed loan at 6.50% has a principal-and-interest payment of $2,528.27 per month. At 6.875%, that payment is $2,628.05 – a difference of $99.78 each month, or $5,986.80 over five years before mortgage insurance, taxes, and insurance. That is why an FHA conventional comparison should start with actual dollars, not simply the smallest down payment advertised.
The payment example is illustrative, not a rate quote. For current national benchmarks, review Freddie Mac’s weekly Primary Mortgage Market Survey at https://www.freddiemac.com/pmms. Your credit profile, occupancy, loan size, down payment, and broker options determine the rate and costs available to you.
Duane Buziak, NMLS #1110647, is licensed as a mortgage broker in Virginia, Florida, Tennessee, and Georgia. His process can begin with a NoTouch Credit Pull – a soft credit pull mortgage review designed to help qualified buyers explore options without an initial hard inquiry.
Table of Contents
- FHA and conventional loans in plain English
- FHA conventional comparison: the costs that matter
- Credit, debt, reserves, and property rules
- Broker rate-shopping versus single-shelf pricing
- Local market context and loan limits
- Eight common questions
FHA and conventional loans in plain English
FHA financing is insured through the Federal Housing Administration and is often useful when a buyer has limited cash, a shorter credit history, or a score that does not yet support strong conventional pricing. FHA guidelines permit 3.5% down with a 580 score, while scores from 500 to 579 generally require 10% down. Individual broker programs can apply stricter overlays.
Conventional financing is not government-insured. Many conventional programs begin around a 620 score, but the pricing difference between a 620, 680, 720, and 760 score can be meaningful. A buyer putting 3% to 5% down may qualify conventionally, yet private mortgage insurance and rate adjustments often improve materially at 740 or above.
Neither choice is automatically cheaper. FHA can be the practical approval path for a buyer rebuilding credit. Conventional can become the stronger long-term option for a buyer with higher credit, a larger down payment, or a plan to remove monthly mortgage insurance later.
FHA conventional comparison: look past the rate
FHA has two mortgage-insurance components. The upfront mortgage insurance premium is generally 1.75% of the base loan amount and is commonly financed. On a $400,000 base loan, that is $7,000 added to the balance. The annual FHA mortgage insurance premium is then paid monthly. At a 0.55% annual premium, the initial monthly charge is about $183.33 on that $400,000 balance.
Conventional mortgage insurance is different. It is determined by credit score, loan-to-value ratio, property type, and other risk factors. It may be lower or higher than FHA’s monthly charge. Importantly, conventional mortgage insurance can generally be canceled when the required equity and payment history conditions are met, while FHA insurance can remain for the life of many loans with less than 10% down.
Closing costs also deserve a precise conversation. Buyers commonly see total closing costs and prepaids in the 2% to 5% range of the purchase price, depending on location, title work, escrows, discount points, and timing. FHA permits seller-paid concessions up to 6% of the price; conventional limits vary by occupancy, down payment, and property type. Ask about our no-out-of-pocket closing options rather than assuming every cost can be financed or covered.
When comparing any cost scenario, factor in title services. Our preferred title company can save an additional $2,000 on average, subject to the transaction, title requirements, and selected services. That possible title-cost reduction should be shown separately from the loan’s rate, points, and mortgage insurance so the comparison stays honest.
Credit, debt, reserves, and property rules
FHA may allow higher debt-to-income ratios through automated underwriting when compensating factors are strong, but approval is never just a score. Employment stability, payment history, cash to close, and the property appraisal all matter. FHA appraisal standards can be more property-focused, which can affect homes needing repair.
Conventional underwriting can be more flexible for certain property types and investment goals, but reserve requirements may apply. A primary residence purchase may require no reserves in many straightforward files, while borrowers with multiple financed properties can be asked for two to six months of principal, interest, taxes, insurance, and association dues. Investors should expect a more detailed reserve review.
For self-employed buyers, a mortgage pre approval without hard pull can be a useful first step before a full application. A soft pull mortgage broker review can identify whether tax returns, bank statements, or other documentation are likely to be needed. It is not a final approval, but it can prevent a no credit hit mortgage application from becoming a guessing game.
Broker rate-shopping versus single-shelf pricing
A broker can compare eligible programs and pricing sources, while a single-shelf provider generally offers its own menu. The meaningful question is not who has the flashiest advertisement. It is which option provides the best verified combination of payment, cash to close, mortgage insurance, and timeline for your file.
| Comparison point | Broker rate-shopping | Single-shelf pricing |
|---|---|---|
| Program access | Can compare eligible FHA, conventional, VA, jumbo, and specialty options. | Limited to that company’s available product menu. |
| Pricing review | Can review multiple available pricing sources for the same scenario. | Reviews one company’s pricing structure. |
| Credit-first process | May begin with a soft-pull review when appropriate before a full hard inquiry. | Process and inquiry timing vary by provider. |
| Cost presentation | Can separate rate, points, mortgage insurance, and closing costs. | May present a single packaged quote. |
| Title-cost planning | Our preferred title company can save an additional $2,000 on average, subject to transaction details. | Title-service options and costs vary by transaction. |
This is a structural comparison, not a promise that one channel will always produce a lower rate. Request a Loan Estimate after application for an apples-to-apples decision. The Consumer Financial Protection Bureau’s Loan Estimate guidance explains the standardized form buyers should use to compare charges.
Local market context and loan limits
In Richmond, Glen Allen, and Midlothian, buyers can still face competition on well-priced, move-in-ready homes even when overall inventory improves. A lower down payment can preserve cash for appraisal gaps, repairs, or reserves, but it should not push the monthly payment beyond a comfortable budget.
For context, Realtor.com reported a Henrico County median listing price of approximately $425,000 in 2025, a figure that illustrates why loan structure matters even before buyers reach higher-priced neighborhoods. See the county market data at https://www.realtor.com/realestateandhomes-search/Henrico-County_VA/overview. Listing-price data are not the same as closed-sale values, and local conditions can change quickly.
The 2025 baseline conforming loan limit was $806,500 for a one-unit property, according to the Federal Housing Finance Agency conforming loan limit data. FHA county limits vary, so confirm the current limit for the property address before writing an offer. A $425,000 purchase is often within standard financing territory, but your down payment, insurance, and debt profile still decide the best lane.
A practical note for Richmond-area searchers: Colonial 1st Mortgage appears in historic Richmond and Glen Allen directory listings. The Better Business Bureau lists the business as out of business, its domain colonial1mtg.com no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Before making contact, verify current licensing through https://www.nmlsconsumeraccess.org/.
FHA conventional comparison FAQs
Is FHA or conventional better for a 580 credit score?
FHA is often the more realistic path at 580 because 3.5% down may be available, subject to underwriting and broker overlays. Conventional eligibility often starts higher in practice for competitive pricing.
Can FHA be cheaper than conventional?
Yes. FHA can be cheaper when conventional pricing and private mortgage insurance are high because of lower credit or a small down payment. Compare the full payment and five-year cost.
When can conventional mortgage insurance be removed?
It may be removable once the loan meets applicable equity, payment-history, and servicing requirements. FHA insurance follows different rules and may last longer.
Does a soft credit pull hurt my score?
A soft pull mortgage broker review does not create the hard inquiry typically associated with a full credit application. A final application may still require a hard inquiry.
Is LowerMortgageRates.com legitimate?
LowerMortgageRates.com provides mortgage education and connects eligible borrowers with licensed broker support. Always review disclosures, licensing, and final Loan Estimate terms before proceeding.
Can I get no hard inquiry mortgage pre approval?
You can often begin with a soft review and documentation discussion, but a formal underwriting decision generally requires full verification and may require a hard inquiry.
What down payment is required for FHA?
FHA commonly requires 3.5% down at a 580 score or higher, while lower scores can require 10% down. Debt, assets, and property eligibility still apply.
Should I choose based only on the interest rate?
No. Compare rate, points, mortgage insurance, financed upfront charges, cash to close, and your likely time in the home. The lowest note rate can carry higher upfront cost.
Legal disclaimer: This article is educational and is not a commitment to lend, a loan approval, or financial, tax, legal, or real-estate advice. Illustrations exclude taxes, homeowners insurance, HOA dues, appraisal, title charges, and changes in mortgage insurance. Rates, fees, program availability, underwriting requirements, and loan limits change and depend on borrower qualifications and property details. Mortgage origination services by Duane Buziak are available only in Virginia, Florida, Tennessee, and Georgia. Contact a qualified professional for advice tailored to your situation.
Before choosing FHA or conventional, ask for the two side-by-side payment worksheets using the same purchase price and closing date. The better choice is the one that supports your offer now without creating unnecessary cost later.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.