This post compares FHA and conventional loans for DC first-time buyers on down payment, credit score, mortgage insurance, condo approval and seller concessions.
FHA and conventional loan requirements side by side
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum down payment | 3.5% | 3% |
| Minimum credit score | 580 (3.5% down) | 620 |
| Mortgage insurance | MIP for life of loan (under 10% down); 11 years otherwise | PMI until 20% equity |
| Loan limit (DC, 2026) | $1,249,125 | $1,249,125 (3% down only up to $832,750; 5% above) |
| Seller concessions | Up to 6% | Up to 3-9% (varies by LTV) |
| Property requirements | Must meet FHA standards | Less restrictive |
| Condo requirements | Building must be FHA-approved | Must be warrantable |
| DTI limit | Up to 50% (with compensating factors) | Up to 45-50% |
FHA loans
FHA advantages
3.5% down, all of it a gift if needed: FHA's minimum down payment is 3.5%, and the whole down payment can be a gift from family.
Lower credit threshold: FHA accepts scores from 580 at its 3.5% minimum down payment, and 500–579 with 10% down (HUD 4000.1).
Higher DTI allowance: FHA can approve debt-to-income ratios up to 50% with compensating factors (strong reserves, minimal payment shock, etc.), which helps a buyer carrying student loans or other debts qualify.
Non-traditional credit: FHA underwriting accepts a shorter credit history or non-traditional credit (rent, utilities) under HUD 4000.1.
Seller concessions: Sellers can contribute up to 6% of the purchase price toward your closing costs. On a $450,000 purchase, that's $27,000.
FHA disadvantages
Mortgage insurance for life: FHA charges an upfront mortgage insurance premium (1.75% of the loan, rolled into the balance) plus an annual premium (0.55% of the loan, paid monthly). The annual premium runs for the life of the loan when you put down less than 10%, which is the case at FHA's 3.5% minimum, and 11 years otherwise. Only a refinance to a conventional loan removes the annual premium.
Building approval required: For condos, the building must be FHA-approved or qualify for FHA single-unit approval. The condo association has to apply for FHA approval, so a small DC building or an older rowhouse conversion may never have been submitted. Check the building on HUD's approved condominium list before you write an offer.
Property standards: FHA appraisals apply HUD's Minimum Property Standards: peeling paint, broken windows, or faulty systems must be repaired before closing.
Conventional loans
Conventional advantages
PMI drops off: Private mortgage insurance (PMI) is required with less than 20% down. PMI cancels automatically at 78% loan-to-value and on request at 80% (Homeowners Protection Act). FHA's MIP does not cancel when you put down less than 10%, so the longer you keep the loan, the more FHA mortgage insurance costs compared with conventional PMI.
Condo approval: Conventional loans require the building to be warrantable under Fannie Mae/Freddie Mac guidelines; FHA building approval is a separate list, and a DC building can be on one and not the other.
Appraisal: Conventional appraisals are not held to HUD's Minimum Property Standards, so a rowhouse with peeling paint or an older system can pass conventional review and fail FHA.
Lower mortgage insurance cost over a long hold: PMI cancels and there is no upfront premium, so a borrower with a score of 720 or higher who keeps the loan pays less mortgage insurance in total than on FHA.
Conventional disadvantages
Higher credit requirement: Minimum 620, and loan-level price adjustments are smallest at 780 and above. Borrowers in the 620-679 range pay higher loan-level price adjustments and higher PMI (Fannie Mae/Freddie Mac LLPA matrices); FHA's premium does not vary by score.
Which loan costs less at each credit score
At a 660 score with the minimum down payment, FHA costs less per month: FHA's 0.55% annual premium does not rise with a lower score, while conventional PMI and loan-level price adjustments both do. At 720 and above, conventional PMI is priced lower and cancels at 80% LTV, and conventional costs less.
One DC-specific rule favors conventional for moderate-income buyers: first-time buyers at or below 120% of area median income get the agency loan-level price adjustments waived, and because DC is a high-cost area the waiver covers high-balance loans too (Fannie Mae/Freddie Mac LLPA matrices).
To see both loans priced on your own file, get pre-qualified and your loan officer will price FHA and conventional side by side.
How long you keep the loan
The longer you hold the loan, the more FHA's life-of-loan premium costs relative to PMI that cancels. A score of 700+ and a stay of more than a few years favor conventional; a score in the 600s or a planned refinance within a few years favors FHA.
Reasons to choose FHA
- Your credit score is below 680
- You have a high DTI ratio (45-50%)
- You want maximum seller concessions (6% vs 3%)
- You plan to refinance within a few years anyway
- The building is FHA-approved and you need the lowest possible down payment
- Family is giving you the whole down payment
Reasons to choose conventional
- Your credit score is 700+
- You want PMI to eventually drop off
- You're buying in a non-FHA-approved building
- You plan to stay for 5+ years
- You want to avoid the upfront MIP fee
- You're buying a rowhouse or property with minor condition issues that might fail FHA inspection
Starting with FHA and refinancing to conventional later
A buyer with a lower credit score or a higher DTI can start with FHA and refinance to a conventional loan after 1-2 years, once they have:
- Improved their credit score
- Built some equity
- Stabilized their finances
The refinance costs $3,000-$8,000 in DC closing costs; recordation tax is not among them, because DC fully exempts residential refinances with a one-page affidavit filed at closing (see our DC recordation tax page). Compare the MIP the refinance would remove against the refinance cost before you choose this route.
DC programs that work with FHA and conventional loans
These DC programs apply with either loan type:
- Reduced recordation tax: 0.725% instead of 1.1%/1.45% for qualifying first-time buyers with a purchase price of $777,000 or less and household income within OTR's table for tax year 2026, with any loan type
- DC Tax Abatement: waives recordation tax and abates property tax for five years on purchases up to $576,000 (tax year 2026) by buyers within the income limits
- Homestead deduction: applies to all owner-occupied properties
- DC Open Doors, through DCHFA's participating lenders: works with FHA or conventional first trusts
- HPAP, through DHCD-certified housing counseling agencies: works with FHA or conventional first trusts
Your choice between FHA and conventional sets your interest rate, your mortgage insurance, and which condo buildings you can buy in. See today's rates.
Next step: see our first-time DC buyer guide or get pre-qualified. It takes two minutes and there is no credit pull.
