FHA vs Conventional Loans in DFW for Tarrant County Buyers

Are you comparing FHA and conventional loans for a home in Tarrant County and feeling unsure where to start? You are not alone. Choosing the right loan can shape your budget, your offer strategy, and your long‑term costs. In this guide, you will learn the key differences, how they play out in the Dallas–Fort Worth market, and simple examples to help you run the numbers with confidence. Let’s dive in.

FHA vs. conventional basics

FHA loans are insured by the Federal Housing Administration and are designed to open doors for more buyers. They allow lower credit scores and smaller down payments, but they require mortgage insurance and have specific property standards.

Conventional loans are not insured by FHA. They typically reward stronger credit and higher down payments with better pricing options and more flexible property requirements. Conventional loans also offer more paths to remove mortgage insurance later.

Key differences at a glance

Credit, down payment, and DTI

Credit score ranges

• FHA: 580 and higher often qualifies for 3.5% down. Scores 500 to 579 may qualify with 10% down. Many lenders add their own score requirements, so check early.
• Conventional: 620 is a common minimum for conforming loans. Stronger credit often leads to better rates and lower PMI.

Down payment options

• FHA: 3.5% down for many buyers. Plan for an upfront mortgage insurance premium that can be financed into the loan.
• Conventional: 3% down programs exist for qualifying buyers. Many choose 5% to 20% down to manage PMI or avoid it completely at 20%.

DTI and reserves

• FHA: Debt‑to‑income ratios often approve around 43%, with the possibility of going to about 50% when other strengths are present.
• Conventional: Many approvals are strongest at or below 45%, and can stretch to about 50% with strong compensating factors.

Mortgage insurance explained

FHA mortgage insurance

FHA has two parts: an upfront mortgage insurance premium, often 1.75% of the base loan amount, and an annual premium paid monthly. If your original loan‑to‑value is above 90%, the annual MIP usually lasts for the life of the loan. If your original loan‑to‑value is 90% or less, MIP is typically required for 11 years.

Conventional PMI

Conventional loans with less than 20% down require PMI. The cost depends on credit and down payment. You can request cancellation at 20% equity and it is set to drop off automatically at 22% equity, subject to lender rules and good payment history. You can also refinance to remove PMI if values or rates improve.

Long‑term cost outlook

Because FHA’s annual MIP often stays on for the long term, a conventional loan can become cheaper over time once PMI is removed. If your credit is strong and your goal is to minimize lifetime cost, conventional can have an edge. If your credit is limited or you need flexible qualifying, FHA can be the doorway that gets you into a home sooner.

Appraisals, property condition, and offers

FHA appraisal impacts

An FHA appraisal includes a check against HUD’s minimum property requirements. If required repairs are identified, the seller may need to complete them before closing or agree to an escrowed repair plan. This can add time and negotiation.

Conventional appraisal approach

Conventional appraisals focus on market value and major safety or structural concerns. There are generally fewer mandatory repairs, which can streamline timelines on homes that are older or need minor updates.

Seller concessions and competitiveness

• FHA: Sellers can contribute up to 6% of the price toward your closing costs and prepaids.
• Conventional: Seller contribution limits vary by down payment. They are generally 3% when you put less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down.

In competitive Tarrant County neighborhoods, sellers sometimes prefer offers that seem more certain. Your loan type can influence how a seller views repairs and timelines, so your agent’s guidance is important.

Loan limits in Tarrant County

Both FHA and conforming conventional loans have maximum limits that change each year. FHA limits are county specific and are often lower than conforming limits. This matters because it affects whether you can use FHA for a given price point in Fort Worth, Arlington, Mansfield, and nearby communities.

• Check the current FHA county loan limit for Tarrant County on HUD’s site.
• Check the current conforming loan limit on FHFA or the Fannie Mae and Freddie Mac sites.

If a home price is above the FHA limit, you would need to bring more cash to fit within the limit or choose conventional financing. For higher price tiers, a jumbo loan may be needed.

Local examples you can use

These quick comparisons show how program rules can affect cash to close and monthly structure. Rates vary by borrower, so always get a live quote from a local lender.

Example A: Entry‑level home at $250,000

• FHA at 3.5% down: $8,750 down. Upfront MIP at 1.75% is about $4,375 if financed into the loan. Monthly payment includes annual MIP.
• Conventional at 3% down: $7,500 down. Monthly payment includes PMI until you reach enough equity to remove it.
• Takeaway: If your credit is limited or you need more flexible approval, FHA may be the quicker path. If your credit is strong, conventional may cost less over time because PMI can drop off.

Example B: Mid‑market home at $400,000

• FHA: Verify the FHA loan limit for Tarrant County. If the limit is below the price, FHA may not cover the full amount.
• Conventional: 20% down avoids PMI. With less than 20% down, plan for PMI until you reach the equity threshold.
• Takeaway: For mid‑market homes, many buyers favor conventional to keep options open on mortgage insurance and appraisals.

Example C: Higher‑priced home at $700,000

• FHA: This price point is likely above the FHA limit in Tarrant County.
• Conventional or jumbo: You would use a conforming loan if within the FHFA limit or a jumbo product if above it.
• Takeaway: For move‑up and luxury tiers, conventional or jumbo financing is typically the path.

Rates, fees, and refinancing

There is no single rule on which program has a lower rate. A conventional borrower with strong credit often sees very competitive rates. An FHA borrower with strong credit can also see similar rates, but the FHA mortgage insurance cost structure may increase total cost over time.

If you start with conventional and pay PMI, you can plan for removal as you build equity. If you start with FHA, the annual MIP usually stays for the life of the loan unless your original loan‑to‑value was 90% or lower or you refinance into a conventional loan later.

FHA assumability and resale

Most FHA loans are assumable with lender or servicer approval. If you buy with FHA while rates are high, an assumable loan can be a selling feature later if rates stay elevated. Conventional loans are typically not assumable.

Texas assistance programs to explore

Many buyers pair their loan with down payment assistance or tax‑credit programs. Availability, income limits, and purchase price caps change, so always verify current rules.

• Texas Department of Housing and Community Affairs (TDHCA): Down payment assistance and Mortgage Credit Certificates.
• Texas State Affordable Housing Corporation (TSAHC): Programs such as Homes for Texas Heroes and Home Sweet Texas.
• City and county programs: Fort Worth, Arlington, and Tarrant County sometimes offer grants or counseling. Check current offerings with local housing departments.
• HUD‑approved housing counselors: Independent guidance is available, often with Spanish language resources.

How to choose your best option

• Check your credit and talk with at least two local lenders. Ask for quotes that include total monthly payment, upfront costs, and mortgage insurance.
• Compare cash to close and long‑term costs. Include FHA’s upfront MIP and annual MIP when you run the numbers.
• Consider the property. If the home needs work, conventional may simplify appraisal and repairs.
• Think ahead to PMI or MIP removal. Conventional PMI can go away with equity. FHA MIP usually stays unless you refinance.
• Align with your offer strategy. In competitive Tarrant County submarkets, your financing type and seller concessions can influence acceptance.

If you want a clear, local plan, schedule a free buyer consult. You will get a step‑by‑step path from pre‑approval to closing, with bilingual support if you prefer Spanish. Reach out to Rosie Carrasco Cox to get started.

FAQs

What credit score do I need for FHA vs. conventional in Tarrant County?

• FHA often works with 580 and higher for 3.5% down and may allow 500 to 579 with 10% down. Conventional commonly starts around 620 for conforming loans.

How does PMI compare with FHA MIP for long‑term cost?

• Conventional PMI can be cancelled at 20% to 22% equity or removed by refinancing. FHA MIP includes an upfront fee and an annual cost that often lasts for the life of the loan.

Are FHA loans accepted by sellers in DFW’s competitive areas?

• Yes, many sellers accept FHA. However, FHA appraisals require certain repairs, which can affect timelines. Your agent can guide strategy based on the property and market.

Can I use FHA for a fixer‑upper in Tarrant County?

• FHA requires homes to meet minimum property standards. If a home needs significant work, a conventional loan or a renovation‑focused product may fit better.

What are the seller concession limits for FHA and conventional?

• FHA allows up to 6% toward buyer costs. Conventional limits are 3% with less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down.

Can I remove FHA mortgage insurance later?

• For most FHA loans originated after 2013, annual MIP cannot be removed unless you refinance into a conventional loan. The exception is loans started at 90% loan‑to‑value or less, which require MIP for 11 years.

How do loan limits affect my options in Tarrant County?

• FHA and conforming limits change yearly. If your price is above the FHA limit, you may need conventional or jumbo financing. Check current limits before you shop.