FHA vs Conventional vs VA vs USDA: Which Loan Is Right for Your Situation?

FHA Loans: Who They're For and What They Require

FHA loans are insured by the Federal Housing Administration, which means the government backs the loan so lenders can offer more flexible qualifying criteria. They are one of the most popular options for first-time buyers because of the lower barriers to entry.

• Down payment: As low as 3.5% with a credit score of 580 or higher. If your credit score is between 500-579, you can still qualify with 10% down.
• Credit score: Minimum 580 for the 3.5% down option, 500 for 10% down. Much more forgiving than conventional loans.
• Mortgage insurance: FHA charges a 1.75% upfront mortgage insurance premium plus an annual MIP of roughly 0.55% for most 30-year loans. On most loans with less than 10% down, that annual MIP stays for the life of the loan. That is the big catch to understand before you pick FHA.
• Loan limits: FHA sets county limits that reset each year. For Bexar County in 2026, the one-unit limit is $557,750. The number moves, so I check the limit for the year you buy.
• Important catch: Unlike conventional PMI, FHA's MIP does not automatically drop off when you reach 80% equity on most loans. If you put down less than 10%, MIP stays for the life of the loan. This makes FHA potentially more expensive over the long term.

FHA loans are a great option for buyers with lower credit scores or limited savings, but they are not always the cheapest option once you factor in the lifetime cost of mortgage insurance. If you have decent credit and enough savings for 5% down, a conventional loan may save you money.

Conventional Loans: The Standard Path

Conventional loans are not government-backed. They are offered by private lenders and typically follow guidelines set by Fannie Mae and Freddie Mac (the government-sponsored enterprises that buy most mortgages). These are the most common type of home loan.

• Conforming limits: The standard conforming loan limit for 2026 is $832,750 in most areas. Loans above that are called jumbo loans and come with stricter requirements.
• Credit score: Typically requires a minimum of 620, but better rates kick in at 660 and above. For the best rates, you generally want 740+.
• Down payment: Options range from 3% (through Fannie Mae HomeReady or Freddie Mac HomeOne programs) to 20% or more. Putting down less than 20% requires private mortgage insurance.
• PMI: Private mortgage insurance is required when your down payment is less than 20%. The key advantage: PMI automatically drops off once your loan-to-value ratio reaches 80%, and you can request early cancellation at 80%. This makes conventional loans cheaper long-term for many borrowers.
• Two types: Conforming (meets Fannie/Freddie limits and guidelines) and jumbo (exceeds conforming limits, with stricter credit and down payment requirements).

Conventional loans are best for buyers with strong credit (660+) and at least some savings for a down payment. Because PMI drops off automatically when you reach 20% equity, they can be a better long-term value than FHA loans for buyers who qualify.

VA Loans: A Benefit Worth Using

VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible veterans, active-duty service members, National Guard members, reservists, and surviving spouses. They are widely considered one of the best mortgage products available.

• Zero down payment: Eligible borrowers can finance 100% of the purchase price. No down payment required.
• No monthly mortgage insurance: Unlike FHA and conventional loans, VA loans have no monthly PMI or MIP. This saves you hundreds of dollars per month compared to other low-down-payment options.
• VA funding fee: Instead of mortgage insurance, VA charges a one-time funding fee ranging from 1.25% to 3.3% of the loan amount, depending on your down payment and whether it is your first or subsequent use. This fee can be rolled into the loan amount. It is waived for veterans with a service-connected disability.
• Competitive rates: VA loans typically offer lower interest rates than conventional or FHA loans because the government guarantee reduces lender risk.
• No loan limit for full entitlement: If you have full VA entitlement, there is no cap on how much you can borrow. Lenders still consider your income and credit, but the VA itself does not cap the loan amount.
• The only real downside: The VA funding fee adds to your loan balance, but it is typically a small price to pay for the benefits of no down payment and no monthly mortgage insurance. VA appraisals also have stricter property condition requirements than conventional loans.

If you are eligible for a VA loan, it is almost always worth exploring first. The combination of zero down payment, no monthly mortgage insurance, and competitive interest rates makes it one of the most powerful home financing tools available.

USDA Loans: Zero Down Where the Address Qualifies

USDA loans are backed by the U.S. Department of Agriculture and offer 0% down in eligible rural and suburban areas. It is the least talked about of the four programs, but around San Antonio and the Hill Country it quietly puts a lot of buyers into homes with nothing down.

• Down payment: 0% for eligible borrowers.
• Credit score: No official minimum, though lenders typically underwrite in the 620-640 range.
• Fees: A 1% upfront guarantee fee plus a low annual fee. You pay a guarantee fee instead of mortgage insurance, and it runs well under typical FHA MIP.
• Income limits: Your household income must stay under the USDA limit for your county and household size.
• Eligible areas: The home has to sit in a USDA-designated area. Many suburban pockets around San Antonio, Bulverde, and the Hill Country qualify, but the address has to pass the map.
• Best for: Buyers whose address and income both line up for the program.

USDA is for primary residences only, and both the location and your income have to qualify. When they do, this is one of the most affordable ways into a home. If you want every zero-down option in one place, my guide to buying a home with no down payment walks VA, USDA, and the assistance programs together.

Side-by-Side Comparison Table

Here is how all four programs stack up against each other under the current rules, at a glance:

How to Pick: A Simple Four-Step Decision Path

You do not need to be a mortgage expert to sort this out. Walk these four questions in order, and most buyers land on their program in a few minutes:

1. 1Are you an eligible veteran, active-duty service member, or qualifying survivor? If yes, VA is the clear winner: 0% down and no monthly mortgage insurance. Run that scenario before anything else.
2. 2Not military? Is the property in a USDA-eligible area, and does your income fall under the county limit? If yes to both, USDA is a serious zero-down contender.
3. 3Neither? Is your credit below 620 or your savings minimal? FHA is built for that: 3.5% down at 580-plus, the most forgiving credit bar of the four.
4. 4620-plus with decent credit? Conventional, especially with a 3% first-time or income-qualified program, and compare it against FHA with real numbers. If you are a first-time buyer who wants the short version of that call, the first-time buyer loan picker walks it start to finish.

• Compare total cost over 5-7 years, not just the monthly payment. A lower monthly payment on an FHA loan may end up costing more over time because the mortgage insurance never drops off. A conventional loan with a slightly higher monthly payment but cancelable PMI may be cheaper in the long run.
• Talk to a loan officer who can run all four scenarios side by side. A good loan officer will show you the actual numbers for each option based on your specific credit profile, income, and target price range. The differences can be dramatic.

The Down Payment Reality: A $320,000 Example

Here is what the down payment math looks like on a $320,000 purchase under the current rules. This is an illustrative example, not a quote for your loan, and rates and fees always move:

The down payment is only half the story. Every one of these programs charges something different in fees and mortgage insurance, and that is usually the bigger difference in your monthly payment than the few thousand dollars between these down payments. When you compare two programs, always ask for the full monthly cost, not the rate alone.

Common Mistakes When Choosing a Loan Type

Over the years, I have seen buyers make the same mistakes over and over when comparing loan options. Here are the most common ones to avoid:

• Assuming VA is only for active duty. Veterans, reservists, National Guard members, and surviving spouses all qualify. If you served, check your eligibility before assuming you cannot use VA.
• Thinking FHA is always the cheapest option. The low down payment and flexible credit requirements make FHA appealing, but the lifetime MIP can make it significantly more expensive than conventional over the long term. Run the numbers for both.
• Putting 20% down on conventional when you could invest that money. If you have the cash for 20% down but the PMI on a smaller down payment is reasonable, consider keeping some of that cash for investments, emergencies, or home improvements. PMI is tax-deductible in some cases, and the return on your invested cash may far exceed the PMI cost.
• Not comparing total cost including mortgage insurance. The monthly principal and interest payment is only part of the picture. Add in mortgage insurance, and the total monthly cost can vary by hundreds of dollars between loan types.
• Ignoring the VA funding fee in your calculations. The VA funding fee adds to your loan balance, but when you compare it against years of FHA MIP or conventional PMI, VA usually still comes out ahead. Do not let the upfront fee scare you off.