FHA vs. Conventional Loan in Texas: Which Is Better?

The short answer: FHA usually wins below a 680 credit score, conventional usually wins above 720, and in between you need to see both quotes. Almost everything else you read about this comparison is secondary to that one fact.

The reason is mortgage insurance, and it works differently in each program. FHA charges every borrower the same 0.55% of the loan balance a year no matter what their credit looks like. Conventional PMI is priced off your score, which means a 760-score buyer pays a fraction of what a 640-score buyer pays for identical coverage. FHA is the better deal precisely when your credit is weaker, and it stops being the better deal once your credit is strong enough that the private market will underprice it.

Most comparisons of these two programs give you a feature table and leave you to guess. Here is the table, and then the actual arithmetic on a Fort Worth home, the same math I run with buyer clients before they pick a program.

How the numbers in this guide work. Every dollar example is anchored to Fort Worth’s $319,999 median sale price for May 2026. Mortgage math uses 6.69%, the 30-year average in early August 2026 per Freddie Mac. FHA premiums come from HUD Mortgagee Letter 2023-05 and PMI rates from published mortgage insurer rate cards. Every percentage below names what it is measured against.

The Comparison, 2026 Numbers

	FHA	Conventional
Minimum credit score	580 (500 with 10% down)	620 typical
Minimum down payment (% of purchase price)	3.5%	3% via Conventional 97 or HomeReady, 5% standard
Upfront mortgage insurance	1.75% of the financed amount, financeable	None
Annual mortgage insurance (% of loan balance)	0.55% for most borrowers, credit-blind	Credit-priced: 0.30% to 1.50% overall, and 0.53% to 1.33% at 95% loan-to-value
Does insurance cancel	No, if under 10% down	Yes, at 80% loan-to-value
Max debt-to-income (% of gross monthly income)	Up to 50% with strong compensating factors	43% typical, 50% in some cases
Tarrant County limit (one unit)	$563,500	$832,750
Seller-paid closing costs (% of sale price)	Up to 6%	3% at low down payments, up to 9% at 20%+ down
Property condition standards	Minimum standards enforced at appraisal	Lender discretion, generally looser

The loan limits are worth one sentence and then you can forget them. Both the FHA limit of $563,500 and the conforming limit of $832,750 sit far above the $319,999 Fort Worth median sale price. Loan limits only enter the conversation in Southlake or Westlake, or on a Keller listing above $550,000.

Why Mortgage Insurance Decides This

Two costs, structured almost oppositely.

FHA mortgage insurance premium. You pay 1.75% of the loan amount upfront, almost always financed into the balance rather than paid in cash. Then 0.55% of the loan balance annually, billed monthly. Your credit score does not change either number. On a 30-year loan with less than 10% down, it never comes off. With 10% or more down, it falls away after 11 years.

Conventional private mortgage insurance. Nothing upfront. The annual rate is a percentage of the loan amount set by your credit score and your loan-to-value, running from roughly 0.30% for a strong file at a low loan-to-value to 1.50% for a marginal one. At the 95% loan-to-value used below, insurer rate cards run about 0.53% for a 740 score to 1.33% for a 640. You can request cancellation at 80% loan-to-value, and it terminates automatically at 78% loan-to-value.

That second difference does more work than the first. FHA mortgage insurance on a 3.5%-down purchase is a permanent line in your budget until you sell or refinance. Conventional PMI is temporary by design.

The Math on a Fort Worth Median Home

Same house, $319,999, both scenarios at the 6.69% thirty-year average.

FHA, 3.5% down. You put $11,200 down and finance $308,799. The upfront premium of 1.75% of that financed amount adds $5,404, bringing the starting balance to $314,203. Principal and interest come to $2,025 a month, and the 0.55% annual premium on that balance adds $144.

Conventional, 5% down. You put $16,000 down and finance $303,999. Nothing is added upfront. Principal and interest come to $1,960 a month, and PMI is whatever your credit score buys.

Now the monthly payment, which turns on your credit score.

Credit score	PMI rate (% of loan a year)	FHA (P&I + MIP)	Conventional (P&I + PMI)	Cheaper
640	1.33%	$2,025 + $144 = $2,169	$1,960 + $337 = $2,297	FHA, by $128
680	0.78%	$2,025 + $144 = $2,169	$1,960 + $198 = $2,158	Conventional, by $11
740	0.53%	$2,025 + $144 = $2,169	$1,960 + $134 = $2,094	Conventional, by $75

Property taxes at Tarrant County’s roughly 2.2% of assessed value and homeowners insurance at DFW’s $4,000 to $4,500 a year apply identically to both, so they are left out here. Add $937 a month to either column for the real payment: $587 in tax and $350 in insurance. PMI rates vary by insurer and lender, so treat that column as a realistic range rather than a quote.

The monthly gap looks small. The lifetime gap does not.

A 740-score buyer on the conventional loan reaches 80% loan-to-value through scheduled payments alone in 126 months, a bit over ten years, sooner if the home appreciates and they order an appraisal to prove it. At $134 a month that is about $16,900 in PMI, and then nothing for the remaining twenty years.

The FHA buyer at 3.5% down pays the $5,404 upfront premium plus 0.55% of the balance every year, which starts at $144 a month and eases to about $121 by month 126 as the loan amortizes. Over the same ten and a half years that is roughly $22,300, and unlike the conventional buyer, the FHA buyer is still paying in year eleven and every year after.

For a 640-score buyer the picture inverts. Conventional PMI at that score runs more than double FHA’s premium, $337 a month against $144, the interest rate itself prices worse, and approval is harder. FHA is not the consolation prize there. It is the correct loan.

When Each One Is the Right Call

FHA makes sense when

Your credit sits below about 680. Your debt-to-income runs high, since FHA underwriting stretches toward 50% of gross monthly income with compensating factors where conventional rarely does. You have a recent credit event, because FHA seasoning requirements after a bankruptcy or foreclosure are shorter. Or your down payment is coming from a gift or an assistance program, which FHA handles more flexibly.

FHA also allows sellers to contribute up to 6% of the sale price toward your closing costs, double the 3% conventional permits at low down payments. In a Fort Worth market where inventory has loosened and sellers are negotiating, that concession ceiling is a live advantage.

Conventional makes sense when

Your credit is 720 or better, which makes PMI cheap and temporary. You can put 20% of the purchase price down, $64,000 on the median home, and skip mortgage insurance altogether, which drops principal and interest to about $1,650 a month. You are buying an older property that might not clear FHA’s minimum condition standards. Or you are competing for a house where the listing agent is sorting offers by perceived risk.

That last point is worth being straight about. FHA appraisals enforce property condition requirements, so on a 1960s home in Riverside or Poly with deferred maintenance, an FHA offer carries a real chance of the appraiser flagging repairs the seller has to fund. Sellers know this. It is a mild preference, not a disqualification, and it evaporates on newer construction.

The Refinance Exit

A lot of Fort Worth buyers should take the FHA loan now and plan to leave it later. Buy at 3.5% down, let payments and appreciation build equity, then refinance to conventional once you clear 20% equity and drop the mortgage insurance permanently.

Two honest caveats. Refinancing costs money, typically 2% to 5% of the new loan amount, and it only works if rates at that future date are close to or below what you are paying. Nobody knows where 2029 rates land. Treat the refinance as a plausible plan rather than a guaranteed one, and if the FHA payment only works because you are assuming a refinance, that is a sign the house is too expensive.

What Neither Loan Covers

Your loan program decides your monthly payment. It does nothing about the several thousand dollars of transaction costs that hit before you get there, and that is the part I take off the table.

I pay for the home inspection out of my own pocket, roughly $600, buyer or seller. I coordinate the appraisal through the lender so you never write a check for it, another $600 or so. You get a $500 moving credit at closing. Buyers never pay me a commission, and if the seller will not cover it, I absorb the difference myself, which is worth understanding alongside how commission actually works after the NAR settlement. If you lose your earnest money for any reason during the deal, I write you a personal check for the full amount. All thirteen of my written guarantees are in the agreement I sign before you sign anything.

There is no lock-in. Text me and the representation ends that day.

Before you pick a program, get the pre-approval done, because your actual credit score and debt-to-income decide this question and estimates of both tend to be wrong. It also helps to know the full picture of buyer costs in Tarrant County before you commit to a payment.

Get Both Quotes Side by Side

There is no universally better loan here. There is a better loan for your credit score, your down payment, and the specific house you want, and finding it takes running the numbers twice rather than once.

Book a free 10-minute Initial Consultation and I will connect you with lenders who will quote both programs on the same property so you can see the real spread. I will tell you which one I would take in your position and why. If the honest answer is to spend four months raising your score before applying, I will tell you that instead, and if the call wastes your time I will send you $100.