Published May 9, 2026 · By Tony, NMLS #293058
This is the most common question I get from first-time buyers, and the answer depends on three things: your credit score, your savings, and how long you plan to stay in the home.
If your credit score is 700+ and you have 5% or more to put down, conventional is usually better. If your score is under 680 or your savings are tight, FHA is probably your path. But let me explain why.
FHA: 3.5% down with a 580+ credit score. On a $600K home, that's $21,000.
Conventional: As low as 3% down for first-time buyers (Fannie Mae HomeReady or Freddie Mac Home Possible). On a $600K home, that's $18,000.
Conventional actually wins on minimum down payment, but the credit score requirements are tighter.
FHA: You pay an upfront mortgage insurance premium (1.75% of loan, rolled into the balance) PLUS monthly mortgage insurance for the life of the loan. It never goes away unless you refinance into a conventional loan later.
Conventional: PMI is required if you put less than 20% down, but it automatically drops off once you reach 78% LTV. And with good credit, conventional PMI rates are often lower than FHA's monthly premium.
This is the single biggest reason to choose conventional if you can qualify. On a $580K loan, FHA mortgage insurance might cost $350/month for the entire 30 years. Conventional PMI at the same amount might be $200/month and disappear after 7-8 years.
FHA: 580 minimum for 3.5% down. 500-579 with 10% down.
Conventional: Technically 620 minimum, but you'll need 680+ to get competitive PMI rates. Below 700, FHA often offers better overall pricing.
Both FHA and conventional have loan limits that vary by county. In Santa Barbara County, the conforming loan limit is $1,017,750 for a single-family home (2026). FHA limits are similar in high-cost areas. For most Central Coast purchases, you'll be within limits on either program.
I run both scenarios for every first-time buyer I work with. Sometimes the answer is obvious, sometimes it's close. The factors that tip the scale are your credit score, how much PMI/MIP you'll pay, and whether you plan to stay long enough for the conventional PMI removal to matter. I'll show you both options side by side with real numbers.
Call or text me at (248) 925‑0539 to talk through your specific situation. No application needed, no commitment.