Thinking about buying in Keller but not sure whether an FHA or a conventional loan fits your budget and goals? You are not alone. Your down payment, credit, and the home’s condition all influence which path makes more sense in Tarrant County. In this guide, you’ll see how each option works, what to expect with appraisals and mortgage insurance, and how to compare monthly payments. Let’s dive in.
FHA vs conventional: the basics
FHA borrowers can qualify with lower down payment and lower credit scores than many conventional products. With FHA, the minimum down payment is 3.5% if your credit score is 580 or higher. If your credit is between 500 and 579, the required down payment can be higher under FHA rules.
Conventional loans can allow as little as 3% down with certain programs, but most buyers plan for 5% to 20% down. Conventional pricing leans more on strong credit to unlock better rates and lower mortgage insurance costs.
FHA loans include two types of mortgage insurance. There is an upfront mortgage insurance premium that is commonly 1.75% of the loan amount, which you can finance into the loan, and an annual MIP that is added to your monthly payment. FHA MIP often continues for the life of the loan unless you refinance into a non‑FHA product. Conventional loans use private mortgage insurance that varies with credit score and loan‑to‑value. The key advantage is that conventional PMI is generally cancellable once you reach about 20% equity and it can automatically end at 22% equity under the Homeowners Protection Act for many loans.
FHA appraisals enforce minimum property standards with a focus on safety and habitability. Conventional appraisals focus on market value, and while lenders may still ask for repairs, the standards are usually less prescriptive than FHA.
Both FHA and conventional loans have county‑based loan limits that update yearly. Verify current limits for Tarrant County using the FHA county loan limit lookup and the FHFA conforming loan limits map before you shop.
What shapes your monthly payment
Your monthly payment includes principal and interest, property taxes, homeowner insurance, and mortgage insurance if required. In Texas, property taxes are a major factor in affordability. Check assessed values and tax district details with the Tarrant County Appraisal District and review rates and schedules with the Tarrant County Tax Office to budget accurately.
FHA mortgage insurance behavior
If you finance FHA’s upfront MIP, it slightly raises your loan balance and your principal and interest payment. The annual MIP adds a recurring cost for as long as FHA rules require. If you plan to stay only a few years, you may refinance out of FHA later if equity and credit improve.
Conventional PMI behavior
Conventional PMI is typically lower than FHA MIP for well‑qualified borrowers. You can remove PMI after you reach the equity threshold, which helps reduce the monthly payment in the future. For a refresher on how PMI works and your rights, see the CFPB’s explanation of private mortgage insurance.
Hypothetical Keller scenarios
These are examples to illustrate tradeoffs. Always use current interest rates, taxes, insurance, and exact PMI/MIP quotes from a lender for final numbers.
Example A: FHA with lower cash to close
- Hypothetical list price: $350,000
- Down payment: 3.5% = $12,250
- Loan amount before UFMIP: $337,750
- If you finance the 1.75% upfront MIP, the new loan is about $344,655
What it means: You bring less cash to closing, but you carry a slightly higher loan balance and monthly MIP that can last for the life of the loan unless you refinance. Also remember that FHA appraisals enforce minimum property standards, which can require repairs before closing.
Example B: Conventional with a small down payment
- Same hypothetical list price: $350,000
- Down payment: 5% = $17,500
- Loan amount: $332,500
What it means: PMI depends on your credit score and loan‑to‑value. With stronger credit, PMI can be modest and you can request cancellation once you reach the equity threshold. If you put 20% down, you avoid monthly mortgage insurance altogether.
Takeaways from the examples
- Cash vs monthly payment: FHA often wins on lower upfront cash. Conventional can win on lower long‑term cost if PMI cancels.
- Equity path: Conventional loans may reach PMI cancellation sooner if you put more down or if the home appreciates.
- Appraisal and repairs: FHA’s property standards can trigger repair requirements, which you or the seller must address before closing.
Property condition and appraisal in Keller
Older homes or those with visible repairs can be challenging for FHA because of minimum property standards. FHA appraisers focus on health and safety items like roof condition or peeling paint on older homes. You can review FHA guidance in the HUD Single Family Housing Policy Handbook (4000.1).
In fast‑rising markets, appraisals can come in below the contract price for both FHA and conventional. That creates appraisal gap risk. Recent comparable sales in the same subdivision and similar condition matter more than list price. If you are targeting move‑in ready or newer construction in Keller or nearby North Richland Hills, FHA and conventional are both practical choices.
If you want a condo, note that FHA and conventional have different project approval rules. Some condo communities require FHA project approval for FHA financing. You can check a building’s status with the FHA condo approval lookup.
Loan limits and program fit
County loan limits can nudge your choice. Confirm the latest Tarrant County caps on the FHA county loan limit lookup and the FHFA conforming loan limits map. If your target price exceeds FHA limits, a conventional loan may be the only fit. If you are within FHA limits and want the lowest cash‑to‑close, FHA can help you get in the door sooner.
Decision checklist for Keller buyers
Use this quick list to compare options with your lender and agent:
- Credit score and report: Pull your credit and correct errors. Ask for side‑by‑side FHA and conventional quotes.
- Cash to close: Tally earnest money, down payment, closing costs, prepaids, and any reserves.
- Property condition: Plan for an inspection and review visible repairs. Homes with deferred maintenance may run into FHA issues.
- Appraisal risk: Review comparable sales. Discuss appraisal gap strategies and contingencies.
- Mortgage insurance: Get exact FHA MIP and conventional PMI quotes and model payments at 1, 5, and 10 years.
- Loan limits: Verify FHA and conforming limits for Tarrant County.
- Seller concessions: Ask your lender about current limits. FHA commonly allows seller contributions up to a program‑capped percentage; conventional limits vary with down payment.
- Down payment assistance: Explore state or local assistance and whether it pairs with FHA or conventional.
When FHA can make sense
- You have modest savings but workable credit near FHA thresholds.
- You value lower cash‑to‑close and are comfortable with long‑term MIP.
- You are buying a newer or move‑in ready home that is unlikely to trigger FHA repair requirements.
- You expect to stay only a few years and may refinance later.
When conventional can make sense
- You can put 5% to 10% or more down, or you have strong credit for low PMI.
- You want the option to cancel mortgage insurance and reduce your payment later.
- The property needs repairs that could conflict with FHA standards.
- Your target price exceeds FHA county limits.
Negotiation tips in today’s market
- Clarify repairs early: If you use FHA, confirm the seller’s willingness to address FHA‑required repairs.
- Prepare for appraisal gaps: In competitive areas of Keller and North Richland Hills, discuss additional earnest money or specific appraisal language with your agent and lender.
- Get two pre‑approvals: Ask for both FHA and conventional pre‑approval letters. Being flexible can strengthen your offer and speed up underwriting.
Next steps
Comparing FHA and conventional is not one‑size‑fits‑all. Your best choice depends on credit, cash, the home’s condition, and your timeline in the property. Get quotes for both programs, confirm current Tarrant County loan limits, and model the monthly cost now and after potential PMI cancellation.
If you want local guidance on neighborhoods, pricing, and how to structure a strong offer, reach out to Jennifer Frank. As a Fort Worth–rooted agent with Century 21 Judge Fite Company, she can connect you with trusted lenders, help you compare options, and guide you from search to close with confidence.
FAQs
Which loan gives the lowest monthly payment in Keller?
- It depends on your credit, down payment, and mortgage insurance; a well‑qualified buyer with a larger down payment often sees lower PMI with conventional, while FHA can be competitive with smaller cash to close.
Can I use an FHA loan on any home in Keller?
- Not always; the property must meet FHA minimum property standards and, for condos, the project may require FHA approval.
How long do PMI and MIP last?
- FHA MIP often lasts for the life of the loan unless you refinance; conventional PMI can be canceled once you reach about 20% equity and may automatically end at 22% equity for many loans.
Do FHA loans always have higher interest rates?
- Not necessarily; rates vary by lender, market conditions, and your credit, so it is best to compare lender quotes for both FHA and conventional.
How do property taxes affect my payment in Tarrant County?
- Texas property taxes are a major part of your monthly cost; check assessed values with the Tarrant County Appraisal District and review rates and schedules with the Tarrant County Tax Office.
What if my price exceeds FHA loan limits?
- You may need a conventional loan; verify current county caps on the FHA and FHFA sites before you shop.
