This is the most common question I get from first-time buyers, and the answer depends on three things: your credit score, your savings, and how long you plan to stay in the home.
The Quick Answer
If your credit score is 700+ and you have a bit more saved for a down payment, conventional is usually better. If your score is under 680 or your savings are tight, FHA is probably your path. But let me explain why.
Down Payment
FHA: a low down payment with a 580+ credit score.
Conventional: an even lower minimum down payment for first-time buyers (Fannie Mae HomeReady or Freddie Mac Home Possible).
Conventional actually wins on minimum down payment, but the credit score requirements are tighter.
Mortgage Insurance (The Big Difference)
FHA: You pay an upfront mortgage insurance premium (rolled into the balance) PLUS monthly mortgage insurance for the life of the loan. It never goes away unless you refinance into a conventional loan later.
Conventional: PMI is required with a smaller down payment, but it automatically drops off as you build enough equity. And with good credit, conventional PMI often costs less than FHA's monthly premium.
This is the single biggest reason to choose conventional if you can qualify. FHA mortgage insurance typically lasts the life of the loan, while conventional PMI falls away once you've built enough equity, often within several years. Over time, that difference can add up to real money.
Credit Score Requirements
FHA: 580 minimum with a low down payment; scores of 500-579 may still qualify with a larger down payment.
Conventional: Technically 620 minimum, but you'll need 680+ to get competitive PMI rates. Below 700, FHA often offers better overall pricing.
Loan Limits in Santa Barbara County
Both FHA and conventional have loan limits that vary by county, set each year by federal regulators and set higher in high-cost areas like Santa Barbara County. FHA limits track closely in high-cost areas. For most Central Coast purchases you'll be within the limits on either program; above them, you're into jumbo financing.
My Recommendation
I run both scenarios for every first-time buyer I work with. Sometimes the answer is obvious, sometimes it's close. The factors that tip the scale are your credit score, how much PMI/MIP you'll pay, and whether you plan to stay long enough for the conventional PMI removal to matter. I'll show you both options side by side with real numbers.
Call or text me at (248) 925‑0539 to talk through your specific situation. No application needed, no commitment.