A $1,500,000 Short Pump purchase with 20% down requires a $1,200,000 loan. At an illustrative 6.75% fixed rate for 30 years, principal and interest is about $7,785 per month. At 6.50%, it is about $7,585 – a $200 monthly difference, or roughly $12,000 over five years before considering the changing loan balance. That purchase is too large for FHA financing and above Virginia’s standard $806,500 conforming ceiling, which is why understanding how FHA versus conventional works starts with loan size, not just the down payment.
Table of Contents
- FHA and conventional: the practical difference
- Credit, down payment, and mortgage insurance
- Where Virginia loan limits change the answer
- Worked jumbo example and broker options
- FAQs
How FHA Versus Conventional Works for Virginia Buyers
FHA and conventional mortgages solve different underwriting problems. FHA is designed for buyers who need more flexible credit treatment, a lower down payment, or more tolerance for a higher debt-to-income ratio. Conventional financing generally rewards stronger credit, larger down payments, and stable documented income with lower long-term mortgage insurance costs.
For a typical owner-occupied purchase in Richmond, Glen Allen, or Midlothian, FHA can permit 3.5% down with a 580 FICO score. Scores from 500 to 579 generally require 10% down. Conventional financing commonly starts at 620 FICO, although pricing and private mortgage insurance can improve materially once a borrower reaches 680, 700, or 740.
The comparison is not simply “FHA is easier” and “conventional is cheaper.” FHA may be the more workable approval when credit events are recent, reserves are limited, or the debt ratio is tight. Conventional can be the lower-cost choice where the borrower has a stronger score and can put 5%, 10%, or 20% down.
Duane Buziak, NMLS #1110647
The mortgage insurance difference
FHA requires both an upfront mortgage insurance premium and an annual premium paid monthly. The upfront premium is generally 1.75% of the base loan amount and is commonly financed into the balance. For most FHA loans above 90% loan-to-value, annual mortgage insurance remains for the life of the loan unless the borrower refinances. At 90% loan-to-value or less, it generally lasts 11 years.
Conventional private mortgage insurance, or PMI, is typically required below 20% down, but it can be removed once the loan meets applicable equity and payment-history requirements. PMI pricing varies sharply by FICO score, debt ratio, occupancy, property type, and down payment. A buyer with a 760 FICO score and 10% down may see a very different PMI quote than a buyer with a 640 score and the same down payment.
Closing costs also differ. Virginia buyers should commonly budget about 2% to 4% of the purchase price for closing costs and prepaids, depending on escrow funding, title work, discount points, and taxes. Ask about no-out-of-pocket closing options when seller concessions, credits, or pricing allow. VirginiaJumboLoans’ preferred title company can save an additional $2,000 on average, subject to transaction details and title-provider availability.
Limits Matter More Than Most FHA vs. Conventional Charts Show
The 2026 baseline conforming loan limit is $806,500, with a $1,249,125 high-cost ceiling in eligible counties. A conventional loan above the applicable county limit is jumbo, with different pricing, reserve, documentation, and appraisal expectations. FHA also has county-specific limits that are materially below many high-value Virginia purchase prices.
That matters in Northern Virginia, but it also matters in selected Richmond-area neighborhoods. Redfin reported a Henrico County median sale price of approximately $405,000 in 2025, while Short Pump, Glen Allen, and certain western Henrico neighborhoods can trade far above that median. Inventory at the entry and mid-price levels remains competitive, while higher-priced homes often require more careful appraisal, reserve, and documentation planning rather than an automatic FHA-versus-conventional decision.
A buyer purchasing near the county median may reasonably compare FHA with conventional. A buyer purchasing a $950,000 home in Glen Allen or a $1,500,000 home in Short Pump is usually evaluating conforming-plus-second strategies, jumbo financing, or a larger down payment. FHA is generally not part of that upper-price conversation.
A worked jumbo-sized Virginia purchase example
Assume a buyer contracts for a $1,500,000 primary residence in Short Pump and puts $300,000 down. The resulting $1,200,000 loan is $393,500 above the standard conforming limit. FHA is not available at that loan size.
Using the illustrative 6.75% rate, the principal-and-interest payment is about $7,785 monthly. If a competing jumbo option prices at 6.50%, the payment falls to about $7,585. The $200 monthly delta equals approximately $2,400 per year and $12,000 across 60 payments. This is rate math only, not a quote, and excludes taxes, insurance, points, and closing costs.
Jumbo underwriting often asks for 6 to 12 months of reserves after closing, depending on loan size, property count, and borrower profile. A $7,785 principal-and-interest payment with 12 months of reserves means roughly $93,420 in documented reserves before adding taxes and insurance. That is why sophisticated buyers should compare total liquidity, not rate alone.
| Dimension | Broker with multiple jumbo investors | Single-shelf jumbo source |
|---|---|---|
| Investor access | Multiple conventional, jumbo, and Non-QM program options | One proprietary menu and overlay set |
| Down payment minimums | Can compare investor-specific 10%, 15%, and 20% structures | Limited to the available in-house structure |
| FICO floors | Can evaluate differing score floors and pricing tiers | One score policy for each product |
| Non-QM overlap | May compare bank statement, asset depletion, and DSCR options | May not offer all alternative-documentation paths |
| Reserve requirements | Can compare reserve overlays across investors | Single reserve standard with limited alternatives |
When FHA Is the Better Choice
FHA deserves serious consideration when a buyer has a 580 to 679 FICO score, a small down payment, or a credit profile where conventional PMI would be expensive. It can also help when qualifying income is solid but the debt ratio is near conventional limits. The trade-off is lasting mortgage insurance at higher loan-to-value levels and lower county loan limits.
A $400,000 home purchase with 3.5% down produces a $386,000 base loan before the financed upfront FHA premium. That structure may preserve cash for reserves and repairs. But a buyer with a 720 FICO score, 5% or 10% down, and clean conventional underwriting may find that conventional PMI is lower and removable sooner.
When Conventional Is the Better Choice
Conventional often makes sense for borrowers with stronger credit, especially when they can reach 10% to 20% down. It provides more flexibility for second homes, investment properties, and higher loan amounts within the relevant county limit. It also becomes the starting point for buyers who may need jumbo financing.
Self-employed buyers should not assume conventional is their only path. A Virginia borrower with strong cash flow but substantial legitimate tax deductions may need a bank statement jumbo option. An investor buying a high-value rental may compare DSCR jumbo terms, where property cash flow rather than personal wages drives qualification. These are not FHA substitutes, but they are relevant when a standard conventional file does not reflect the borrower’s actual capacity.
For buyers concerned about credit impact, a soft credit pull mortgage review can establish a preliminary range without a hard inquiry. A no hard inquiry mortgage pre approval discussion is not a final approval, but it can help identify whether FHA, conventional, jumbo, or Non-QM documentation is the realistic route. A soft pull mortgage broker can review debt, estimated score, and liabilities before a formal no credit hit mortgage application moves into full underwriting.
FAQ
Is FHA easier to qualify for than conventional?
Often, yes. FHA can allow lower scores and smaller down payments, but approval still depends on income, debts, property condition, and documentation.
What FICO score is needed for FHA?
A 580 FICO score can support 3.5% down under standard FHA guidelines. Scores from 500 to 579 generally require 10% down.
What FICO score is needed for conventional financing?
Many conventional programs start at 620 FICO, though stronger scores typically improve pricing and PMI costs.
Does FHA mortgage insurance ever go away?
For most FHA loans above 90% loan-to-value, monthly mortgage insurance remains for the loan term unless the borrower refinances. At 90% loan-to-value or less, it generally lasts 11 years.
Can FHA finance a jumbo home purchase?
No. FHA county limits are below jumbo loan sizes. High-value purchases generally require conventional jumbo or an alternative documentation jumbo structure.
Is 20% down required for conventional financing?
No. Conventional options may allow 3%, 5%, 10%, or more down, subject to occupancy, credit, loan amount, and mortgage insurance requirements.
Can self-employed borrowers obtain jumbo financing?
Yes. Depending on the file, bank statement, asset depletion, or other Non-QM jumbo options may better reflect qualifying income than tax returns alone.
Can I review options without a hard credit inquiry?
A preliminary soft-pull review may be available. Final approval and pricing can require additional verification and a formal credit process.
The best choice is the one that fits the actual property price, your documented income, cash reserves, credit profile, and five-year plan. Start with the payment and total cash required, then choose the program rather than forcing a program to fit the purchase.
Legal disclaimer: Mortgage programs, rates, annual percentage rates, fees, loan limits, credit standards, mortgage insurance, reserve requirements, and eligibility are subject to change without notice. Examples are illustrative only and are not a commitment to broker, lend, extend credit, or lock a rate. All loans are subject to underwriting approval, appraisal, property eligibility, and applicable program guidelines. Consult appropriate tax, legal, and financial professionals regarding your individual situation.
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.
