FHA vs Conventional vs VA in North Texas: The Real Trade-offs (2026)

Most buyers pick a loan on the down payment. The down payment is the least important part of the decision.

The question that actually costs or saves you money over the years you own the house is what happens to the mortgage insurance - whether it ever comes off, and what it takes to remove it. On that question the three loan types behave completely differently, and the one that is easiest to qualify for is the one you can never escape without refinancing.

Here is the honest comparison, with the current 2026 numbers and where they came from.

The Question That Actually Decides It

Every loan under 20% down carries insurance that protects the lender, not you. What separates FHA from conventional is not the rate and not the down payment. It is this:

• Conventional PMI is cancellable by federal law. The Homeowners Protection Act of 1998 gives you the right to request cancellation at 80% loan-to-value of the original value, and requires automatic termination at 78% on the scheduled amortization date, provided the loan is current. Your lender has to disclose both projected dates at closing.
• FHA mortgage insurance at 3.5% down is not cancellable at all. Not at 80%, not at 78%, not ever. It runs for the life of the loan.

That is the whole comparison in two bullets. Everything below is detail on top of it.

What You Can Borrow Here

Before anything else, check whether the loan type can even cover the house, because in this market that is a live constraint rather than a formality.

Sources: HUD CY2026 forward limits file (Collin TX085, Dallas TX113, Denton TX121, MSA 19100), effective for case numbers assigned on or after January 1, 2026. FHFA conforming loan limit announcement, November 25, 2025. VA loan limits apply only where entitlement is reduced.

The FHA number deserves a second look, because it has a quiet consequence. $563,500 has not moved since 2024 - HUD calculated it against a median-price basis dated January 2024. North Texas prices did move in that time. So an FHA loan no longer reaches the median home in Frisco (about $688K), Prosper ($869,480), Heath ($749,551), or Flower Mound. It comfortably covers the median in Denton, Garland, Lewisville, and Rockwall.

If you are shopping the northern Collin County corridor on an FHA pre-approval, that mismatch is worth knowing before you tour rather than after you write an offer.

One clarification, because the conforming figure is routinely misread as a price ceiling. It is a loan-amountceiling, so your down payment decides which side of it you land on. At Prosper's $869,480 median you stay conforming with about 4.3% down or more; go below that and the same house needs a jumbo loan, which is a different underwriting conversation - stricter credit and documentation, and reserves that are often the binding constraint rather than the down payment itself.

FHA: Easiest to Qualify, Hardest to Escape

FHA exists to get people into houses who would not otherwise qualify, and it does that job well. The credit thresholds are the lowest in the market:

• 580 or above: 3.5% down.
• 500 to 579: 10% down.
• Below 500: not eligible.

Then the insurance:

• Upfront premium of 1.75% of the base loan amount, typically financed into the loan.
• Annual premium of 55 basis points at above 95% LTV, which is where a 3.5%-down buyer lands, for the life of the loan.
• Put 10% or more down and the premium drops to 50 bps and terminates after 11 years. That 90% LTV line at origination is the only thing that buys you an exit.

I want to be blunt about the part that gets misreported constantly, including by people who should know better. You will read that FHA insurance drops off at 78% loan-to-value. It does not. That rule applies only to case numbers assigned before June 3, 2013. If you buy today with 3.5% down, paying your balance down changes nothing about the premium. The only way out is to refinance into a conventional loan, which means qualifying again, at whatever rates exist then, and paying closing costs a second time.

That is not a reason to avoid FHA. It is a reason to go in knowing that you are choosing a loan you will probably refinance, and to treat the premium as a real cost in your monthly math rather than something that quietly disappears.

Sources: HUD Handbook 4000.1 Update 17 (revised November 26, 2025), Appendix 1.0; HUD Mortgagee Letter 2023-05, effective for case numbers endorsed on or after March 20, 2023 and confirmed operative in 2026.

Conventional: The Insurance Comes Off

Conventional financing asks more of your credit and rewards it with an exit. The low-down-payment programs are HomeReady (Fannie Mae) and Home Possible (Freddie Mac), both at 3% down, both capped at 80% of area median income.

One caution on those income caps: AMI is calculated by address, not by county, and the limits were updated effective June 13, 2026. Two houses on opposite sides of the same street in Plano can return different answers. Nobody should quote you a Collin County number for this - run the specific address through the agency lookup tool, which any lender can do in a minute.

Above the income ceiling, standard conventional financing generally starts at 5% down. PMI cost is credit-driven and commonly quoted in the range of roughly 0.46% to 1.50% of the loan per year, with strong credit near the bottom of that band. I would treat that range as indicative rather than precise - it comes from industry analysis rather than a published rate card, and your actual quote depends on the specific mortgage insurer your lender uses.

The thing to hold onto is the statutory right. At 80% LTV you can request cancellation; at 78% it must terminate automatically. Both dates get disclosed to you at closing, so you never have to guess.

VA: The Best Loan in the Market, If You Have It

If you are eligible, this is usually the answer and it is not close. No down payment where your entitlement covers the loan, and no monthly mortgage insurance at all- neither FHA's permanent premium nor conventional's cancellable one. What replaces it is a one-time funding fee:

VA funding fee schedule effective April 7, 2023, current as of July 2026.

Look at the second column against the third. On a subsequent use, finding 10% down takes the fee from 3.30% to 1.25% - on a $500,000 loan that is roughly $10,250 saved for $50,000 put down. That is a far stronger argument for a down payment than the same move makes for a first-time user, and it is the calculation most repeat VA buyers never run.

You are exempt from the fee entirely if you receive VA compensation for a service-connected disability, are eligible for it but receive retirement or active-duty pay instead, are a surviving spouse receiving DIC, hold a proposed or memorandum rating from a pre-discharge claim, or have evidence of a Purple Heart on or before closing. If any of those apply, say so early - it changes the numbers materially and it is missed more often than it should be.

Texas Down Payment Assistance

Two statewide programs, and the difference between them matters more than the headline percentages.

TSAHC offers 2% to 5% of the loan amount, structured as either an outright grant that is never repaid or a three-year forgivable second lien repaid only if you sell or refinance inside three years. Minimum credit score 620. For Collin, Denton, and Dallas counties the income limits are identical:

• Home Sweet Texas: $181,650
• Homes for Texas Heroes: $205,870 - covering teachers and school support staff, police and security officers, firefighters and EMS, veterans and active military, corrections officers, and nursing and allied health faculty

TDHCA runs My First Texas Home (first-time buyers, with the three-year test waived for veterans and in qualified targeted census tracts) and My Choice Texas Home (no first-time requirement, and it adds conventional). Both offer up to 5%, but as second liens rather than grants - either a 30-year deferred repayable lien or a three-year forgivable one. There is also a Mortgage Credit Certificate worth up to $2,000 a year as a federal tax credit.

One practical warning. TDHCA's own materials say supplies are limited and direct lenders to a daily rate notice for availability. Assistance funds genuinely run out and come back. Do not build a purchase around a program without confirming it is funded that week, and do not let anyone tell you a rate or an allocation is permanent.

Sources: TSAHC combined income and purchase price limits, effective June 13, 2026; TDHCA program chart and lender guide. Income limits change - confirm current figures with a participating lender before relying on them.

How I Would Actually Choose

If you are eligible for VA, take VA. No monthly insurance beats every other consideration, and if you are fee-exempt it is not a discussion at all.

If your credit clears conventional, take conventional, even at a slightly higher rate. The cancellable insurance is worth more over a normal holding period than a quarter point usually is, and you keep the option to stop paying it without refinancing.

If FHA is what gets you approved, take FHA and plan the exit. It is the reason a lot of people own a home at all, and there is nothing wrong with using it. Just budget the premium as permanent, because for you it is, and revisit refinancing once your credit and equity have both improved.

And on the question everyone asks first: rates. The Freddie Mac 30-year average was 6.55% for the week of July 16, 2026. That figure will be stale before long, which is exactly why I would not choose a loan type on a rate quote. Choose it on the insurance rules, which do not move weekly, and shop the rate separately.

Run your own numbers on whichever path fits, and if the FHA limit is what is squeezing you in the northern suburbs, it may be worth looking at the cities where it still clears the median.

One last thing that sits alongside the loan choice rather than inside it. Whichever financing you pick, the contract you sign it under changed on July 1, 2026, and the option period is where your leverage actually lives - including a paragraph that voids your walk-away right if one blank is left unfilled.