On a $400,000 Virginia home, an FHA buyer putting 3.5% down brings $14,000 for the down payment. The $386,000 base loan includes a financed 1.75% upfront mortgage insurance premium of $6,755, creating a $392,755 financed balance. At 6.50% on a 30-year term, principal and interest is about $2,482 per month; estimated FHA monthly mortgage insurance of $177 brings the estimated mortgage payment to $2,659 before taxes, homeowners insurance, and HOA dues. A conventional buyer putting 5% down borrows $380,000. At 6.75%, principal and interest is about $2,465, plus an estimated $143 monthly private mortgage insurance payment, or about $2,608. That is a $51 monthly difference, or $3,060 over five years, before considering changing insurance costs, rates, and equity.
For Virginia buyers comparing FHA versus conventional loans, the lower payment is not automatically the better deal. The right answer depends on cash reserves, credit profile, future plans, seller concessions, and whether mortgage insurance can be removed. In competitive pockets of Richmond, Glen Allen, and Virginia Beach, the financing choice can also affect how clean and credible an offer looks to a seller.
By Duane Buziak, NMLS #1110647
Table of Contents
- FHA and conventional loan basics
- A side-by-side program comparison
- Credit, down payment, and mortgage insurance
- Virginia prices, limits, and local market conditions
- How to choose based on your financial plan
- Soft-pull prequalification before a full application
- Frequently asked questions
FHA versus conventional loans: the practical difference
FHA loans are government-insured mortgages designed to allow more flexible qualification. A conventional loan follows standards commonly used by Fannie Mae and Freddie Mac, with private mortgage insurance typically required when the down payment is below 20%.
FHA can be compelling when a buyer has a thinner credit file, a recent credit event that now meets program waiting periods, or limited cash for a down payment. Conventional financing can become more attractive when a buyer has stronger credit, can put down at least 5%, or expects to reach 20% equity and remove monthly private mortgage insurance.
For 2025, the standard conforming conventional loan limit was $806,500 in most Virginia counties, according to Federal Housing Finance Agency data. The FHA one-unit floor was $524,225, though county limits can vary. A mortgage broker should confirm the current county-specific limit before a contract is written, especially for higher-priced homes in Northern Virginia and Charlottesville-area markets.
| Comparison point | FHA loan | Conventional loan |
|---|---|---|
| Broker access | Available through FHA-approved mortgage brokers and correspondent channels | Broad broker access across agency programs and private mortgage insurance options |
| Typical FICO floor | Often 580 for 3.5% down, subject to underwriting and overlays | Often 620, though pricing and approval strength improve as scores rise |
| Down payment | 3.5% with qualifying credit and debt profile | Often 3%, 5%, 10%, or 20%, depending on the program |
| Mortgage insurance | Upfront premium plus monthly mortgage insurance in most cases | Private mortgage insurance below 20% down, often removable later |
| Program breadth | Purchase, streamline refinance, and renovation options | Primary homes, second homes, investment property, jumbo-adjacent solutions, and more |
| Pricing flexibility | More standardized insurance structure | Pricing can improve materially with stronger FICO, reserves, and lower debt ratios |
Credit score, debt ratio, and cash reserves
A 580 score is often cited as FHA’s threshold for 3.5% down, but a score alone does not approve a mortgage. Payment history, income stability, debt-to-income ratio, assets, and property eligibility still matter. Buyers with scores from 620 to 679 may qualify for conventional financing, but the private mortgage insurance cost can be high enough that FHA deserves a serious comparison.
At 700 or 720 and above, conventional pricing frequently becomes more competitive, particularly when the buyer has 5% to 10% down. A borrower with a 760 score, 10% down, and six months of housing-payment reserves is positioned very differently from a borrower with a 620 score, 3% down, and minimal savings. Reserves are not always required for a standard primary residence, but they can strengthen an approval and are commonly expected for second homes, investment homes, and larger loan amounts.
Closing costs in Virginia often land around 2% to 5% of the purchase price, depending on title work, prepaid taxes and insurance, appraisal, underwriting conditions, and negotiated seller concessions. On a $400,000 purchase, that is roughly $8,000 to $20,000 before any seller contribution. When a transaction uses my preferred title company, buyers save an additional $2,000 on average on title-related costs. That is separate from the $3,060 five-year payment difference in the worked example above.
Virginia market numbers should shape the loan choice
Statewide, Virginia REALTORS reported a 2025 statewide median sales price near $425,000. County-level numbers show why a one-size-fits-all mortgage recommendation fails. Henrico County’s median sale price was approximately $395,000, Chesterfield County was around $410,000, and Albemarle County was near $500,000 in recent Virginia REALTORS local market reporting.
In Short Pump and Glen Allen, buyers often face competition for updated homes near major employment corridors, making faster underwriting and a clean financing profile valuable. In Chesterfield and Midlothian, inventory can vary sharply by school zone and home condition. In Virginia Beach and Hampton Roads, military moves, seasonal demand, and insurance considerations can affect the offer strategy. A lower FHA down payment may preserve cash for repairs and reserves, while a conventional offer may better fit a seller who prefers fewer property-condition concerns.
FHA appraisals focus on value and basic property safety and habitability. That is not a problem for most well-maintained homes, but peeling paint, damaged stairs, exposed wiring, or certain repair issues can require correction before closing. Conventional appraisals also identify material concerns, but FHA’s property standards can affect the timeline on older homes.
When FHA is the stronger option
FHA is often worth choosing when it helps a buyer become a homeowner without draining every dollar of savings. The program can work well for a first-time buyer with a 640 score, limited down payment funds, stable income, and a home price below local FHA limits. Seller-paid closing costs can also be especially helpful when the buyer needs cash reserves after closing.
It can also make sense when conventional private mortgage insurance is expensive because of a lower score. The comparison must use actual quotes, not assumptions. A conventional rate may look lower in a headline, while the monthly insurance or pricing adjustment changes the real payment.
When conventional is the stronger option
Conventional is frequently the better long-term choice for buyers with solid credit and a realistic path to 20% equity. Private mortgage insurance can generally be requested for removal once the loan reaches the required equity threshold, subject to servicing rules. FHA monthly insurance commonly remains for the life of the loan when the original down payment is below 10%, unless the borrower later refinances.
Conventional financing is also more flexible for some higher-balance purchases, second homes, and investment strategies. Investors should compare conventional options with DSCR financing when rental income, rather than personal wage income, is central to qualification. Self-employed buyers may also need a comparison between conventional documentation and bank statement or non-QM programs.
Start with a soft credit pull, not guesswork
A soft credit pull mortgage review lets a broker examine useful credit information without a hard inquiry. That gives buyers a practical starting point when they want a no hard inquiry mortgage pre approval conversation before they are ready for a full application. A mortgage pre approval without hard pull can identify likely options, payment ranges, and credit items to address.
A soft pull mortgage broker can explain whether FHA, conventional, VA, USDA, jumbo, DSCR, or non-QM may fit before the borrower commits to a contract. A no credit hit mortgage application review is not a final approval and does not replace full underwriting, income documentation, asset verification, appraisal, or a hard inquiry when required to move forward. It is simply a smarter first conversation for buyers protecting their credit.
Frequently Asked Questions
Is FHA cheaper than conventional every month?
Not always. FHA may offer a lower rate or easier approval, but its upfront and monthly mortgage insurance can make conventional less expensive for stronger-credit buyers.
Can I get an FHA loan with a 580 credit score?
Many FHA scenarios allow 3.5% down at 580, but approval also depends on income, debts, payment history, property condition, and broker underwriting requirements.
What credit score is needed for a conventional loan?
A 620 score is a common starting point. Better pricing and lower private mortgage insurance costs are often available at higher scores.
Can FHA mortgage insurance be removed?
With less than 10% down, FHA monthly mortgage insurance usually lasts for the loan term. Refinancing is often the path to removing it.
Can conventional private mortgage insurance be removed?
Usually, yes. It may end automatically or be removed by request when the required equity and payment-history standards are met.
Does Old Dominion Mortgages offer soft-pull prequalification?
Yes. A NoTouch Credit Pull review can help Virginia buyers explore likely mortgage choices without a hard inquiry at the initial planning stage.
Is Old Dominion Mortgages a broker?
Yes. Old Dominion Mortgages is a Virginia-focused mortgage broker brand connected to Coast2Coast Mortgage, offering access to multiple program categories rather than a single shelf.
Are FHA appraisals harder than conventional appraisals?
They are not automatically harder, but FHA has property-condition requirements that may require repairs on homes with visible safety or habitability issues.
Can I use either loan type in Richmond or Virginia Beach?
Yes, provided the property, county loan limit, borrower profile, and contract terms meet program requirements. Local competition should influence the offer strategy.
What should I compare besides the interest rate?
Compare cash to close, mortgage insurance, seller concessions, points, payment, five-year cost, reserves after closing, and the likely refinance or equity plan.
The best mortgage is the one that supports the next five years of your life, not merely the lowest advertised rate on the day you search. Get the numbers side by side, protect your credit while planning, and choose from a position of clarity.
Legal disclaimer: Mortgage programs, rates, fees, loan limits, mortgage insurance, qualification standards, and property requirements can change without notice. Examples are educational estimates only and are not a commitment to provide financing. Payment examples exclude taxes, homeowners insurance, HOA dues, and other applicable costs. All loans are subject to credit approval, income and asset verification, appraisal, title review, and program guidelines. Equal Housing Opportunity.
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.
