Trying to decide between an FHA loan and a conventional loan for a Dallas home purchase can feel like alphabet soup. You want a clear path that fits your budget today and your plans tomorrow. In this guide, you will learn the key differences, how Dallas County loan limits affect your options, what mortgage insurance really means for your payment, and a simple way to pick a path with confidence. Let’s dive in.
FHA vs conventional: quick snapshot
Choosing between FHA and conventional starts with the basics. Here is how they differ at a high level:
- FHA: Government insured, built to expand access with lower down payments and more flexible credit guidelines. Requires an upfront mortgage insurance premium and an annual mortgage insurance premium. Appraisals follow minimum property standards.
- Conventional: Backed by Fannie Mae or Freddie Mac. Often asks for higher credit scores and, unless you put 20% down, private mortgage insurance applies. PMI can usually be cancelled once you build enough equity.
If you want the lowest down payment and your credit is still a work in progress, FHA may be the easier on-ramp. If you have stronger credit and want mortgage insurance that can fall off sooner, conventional often wins long term.
Dallas loan limits: what they mean and where to check
Both FHA and conforming conventional loans have county-level loan limits that update every year. Your loan amount must fit under these limits to use that product without moving into jumbo territory.
- FHA limits: Check the current single-family limit for Dallas County using the official HUD FHA mortgage limits tool.
- Conforming limits: See the county-level conforming threshold on the FHFA conforming loan limits page.
If your needed loan is higher than the conforming limit, you will likely need a jumbo loan, which usually requires stronger credit and larger reserves. If your needed loan fits under conforming but exceeds the FHA limit, FHA may be off the table unless you increase your down payment.
Quick steps to test your price range
- Pick a realistic price range and a few target neighborhoods in Dallas.
- Estimate down payment options you can make today and a stretch option for later.
- Compute a few loan amounts: loan = price minus down payment.
- Compare each loan amount to the Dallas County FHA limit and the conforming limit using the links above.
- If the loan exceeds conforming, plan for jumbo or increase your down payment.
Mortgage insurance: MIP vs PMI explained
Mortgage insurance protects the lender, not you, but it strongly affects your monthly payment and long-term cost.
FHA mortgage insurance (MIP)
- Components: an upfront mortgage insurance premium (often added to the loan) plus an annual premium paid monthly.
- Duration: For many FHA loans, the annual MIP lasts a long time, and in some cases for the full loan term depending on your starting loan-to-value. See current rules on HUD’s mortgage insurance premiums page.
- Removal: Borrowers often remove FHA MIP by refinancing into a conventional loan after building enough equity.
Conventional private mortgage insurance (PMI)
- Pricing: Varies with your credit score, down payment, and loan features. You can pay it monthly, upfront, or a mix.
- Cancellation: You can request PMI cancellation at 80% loan-to-value and it is required to terminate at 78% if you are current, per the Homeowners Protection Act. Learn more about cancellation from the CFPB’s PMI guidance.
- Impact: Because PMI can drop off, conventional can be cheaper over the life of the loan, especially if home values rise or you pay extra toward principal.
Qualification differences that matter in Dallas
Credit score and down payment
- FHA is known for accepting lower scores with 3.5% down at or above FHA thresholds, and higher down payments for lower scores, subject to lender overlays.
- Conventional typically rewards higher credit. Many lenders use 620 as a practical minimum, and better pricing tends to come with higher scores. Some first-time buyer programs allow as little as 3% down, with PMI.
Debt-to-income and reserves
- Both programs analyze your debt-to-income ratio. Automated underwriting can approve higher DTIs with compensating factors. Jumbo loans often require stronger credit and more reserves.
Property and appraisal
- FHA appraisals follow minimum property standards that can flag repairs. This can affect timelines and negotiations. Conventional appraisals are often more flexible on condition in comparison, depending on the property.
Dallas-specific factors to weigh
Price patterns by neighborhood: Dallas spans a wide range of price points. Entry-level neighborhoods often work with either FHA or conventional within the county limits. Higher-price areas may push you to conventional or even jumbo, depending on the year’s limits.
Property taxes and monthly budget: Dallas County property tax rates vary by city and school district. Add property taxes, homeowner’s insurance, HOA dues, and mortgage insurance to principal and interest to see your true monthly cost. For local tax context, visit the Dallas Central Appraisal District.
Down payment assistance: State and local assistance can pair with FHA or conventional loans, subject to program rules.
- Explore the TDHCA first-time buyer programs.
- Review programs through the City of Dallas Office of Housing. These programs have income and price limits and may require specific loan types, so verify details before you lock a plan.
How long you plan to own: If you plan to stay 3 to 7 years or more and expect equity to grow, conventional PMI that drops off can be attractive. If you need the lowest down payment to buy now, FHA can help you enter the market sooner, with a plan to refinance when equity allows.
A simple decision path
Use this framework to narrow your choice:
- Confirm your target price and neighborhoods. Align with current Dallas inventory and your must-haves.
- Run a few down payment options. Calculate the resulting loan amount for each.
- Check Dallas County loan limits. Use HUD for FHA and FHFA for conforming. If your loan exceeds conforming, consider jumbo or increasing your down payment.
- Assess your credit and DTI. If your credit is limited or you have recent credit events, FHA may be more forgiving. If your credit is strong, conventional can reduce lifetime mortgage insurance cost.
- Compare mortgage insurance outcomes. Estimate PMI and MIP with a lender. Consider how soon PMI could cancel versus FHA MIP that may last longer.
- Add total monthly costs. Include taxes, insurance, HOA dues, and closing costs. Check if you qualify for assistance through TDHCA or the City of Dallas.
- Choose the path that fits your timeline. Prefer to avoid long-term mortgage insurance and you have solid credit and 5% to 20% down. Conventional likely fits. Need minimum down or flexible credit. FHA can get you in the door, with a plan to refinance later.
- Validate with professionals. Ask at least two lenders for quotes on rates, mortgage insurance, and total monthly payment. Partner with a local agent to match neighborhoods to your budget and timing.
Illustrative Dallas scenarios
These examples are for illustration only. Always confirm current loan limits, rates, and insurance quotes with a lender.
Scenario A: Lower-priced home
- Price: $300,000
- FHA at 3.5% down: down payment about $10,500; loan about $289,500 before adding upfront MIP. If the Dallas County FHA limit covers this loan amount, FHA is an option. You gain flexible credit treatment but pay upfront and annual MIP.
- Conventional at 5% down: down payment $15,000; loan $285,000 with monthly PMI that can be cancelled later.
- What tips the scale: With credit near FHA thresholds and a small down payment, FHA may be simplest. With credit in the mid 600s or higher and a plan to build equity, conventional often saves more over time.
Scenario B: Mid-priced home
- Price: $450,000
- FHA at 3.5% down: loan about $434,750. Verify this against the current Dallas County FHA limit. If it exceeds the limit, you would need a larger down payment for FHA.
- Conventional at 10% down: loan $405,000 with PMI that can drop as you reach equity targets.
- What tips the scale: Many buyers in this range choose conventional, either because the FHA limit is exceeded or to reduce long-term mortgage insurance.
Scenario C: Higher-priced home
- Price: $700,000
- At this level, your loan amount may exceed both FHA and possibly conforming limits, depending on the year’s thresholds. You may need a jumbo loan or a much larger down payment.
- What tips the scale: Jumbo financing typically requires higher credit scores, lower debt-to-income, and more reserves. If you are shopping in higher-price Dallas neighborhoods, plan for conventional or jumbo underwriting.
What to do next
- Get side-by-side quotes from at least two lenders that include rate, estimated MIP or PMI, taxes, insurance, and HOA.
- Check Dallas County limits using HUD and FHFA, then match your neighborhoods and budget.
- Explore TDHCA and City of Dallas assistance to see if you qualify.
- Partner with a local advisor who knows how each loan type plays out in Dallas negotiations and timelines.
If you want a clear path and introductions to trusted Dallas lenders, reach out to the Donna and Gail Team. We will help you compare options, pressure-test the numbers, and align your financing with the right neighborhood and timeline. Start the conversation with Donna Jobe today.
FAQs
What is the main difference between FHA and conventional loans?
- FHA is government insured with lower down payment and flexible credit, but it requires upfront and annual mortgage insurance that can last longer. Conventional often needs stronger credit, uses private mortgage insurance, and PMI can usually be cancelled.
How do I check Dallas County loan limits for FHA and conforming loans?
- Use the HUD FHA mortgage limits tool for FHA and the FHFA conforming limit page for conventional to see the current county thresholds.
Can I remove FHA mortgage insurance once I buy a Dallas home?
- FHA mortgage insurance removal is limited; many borrowers refinance into a conventional loan after building sufficient equity, subject to current HUD rules and lender requirements.
Which loan usually gives the lowest monthly payment in Dallas?
- It depends on your rate, down payment, and mortgage insurance; FHA can have competitive rates but adds upfront and annual MIP, while conventional PMI may be temporary and can fall off as you reach 20% equity.
Do Dallas down payment assistance programs work with both FHA and conventional loans?
- Many assistance programs can pair with FHA or conventional, but they have income, price, and loan-type rules; review the TDHCA programs and the City of Dallas Office of Housing for current details.
