Trying to choose between FHA and conventional financing for a home in Ballwin? You’re not alone. The loan you pick affects your down payment, mortgage insurance, how your offer is received, and your long-term costs. In this guide, you’ll learn the key differences, what matters most in St. Louis County, and how to decide which path fits your budget and goals. Let’s dive in.
FHA vs. conventional: quick take
If you want a smaller down payment or have credit challenges, FHA can open doors. If you have strong credit and want mortgage insurance you can remove, conventional often wins over time. In competitive Ballwin neighborhoods, sellers may prefer conventional or cash, but FHA buyers can still compete with smart strategy and clean terms.
Down payments and eligibility
FHA minimums and flexibility
- Typical minimum down payment is 3.5% when your credit score is at or above 580.
- If your score is lower, FHA may still be possible with a larger down payment, subject to lender guidelines.
- FHA allows gift funds for some or all of your down payment and closing costs, following HUD rules.
- You must occupy the home as your primary residence, usually within 60 days of closing.
Conventional options, including 3% down
- Conventional loans can go as low as 3% down for eligible programs such as Fannie Mae HomeReady and Freddie Mac Home Possible.
- Many conventional buyers choose 5% to 20% down to reduce PMI and improve pricing.
- Gift funds are often allowed, depending on the specific program and lender.
Mortgage insurance: MIP vs. PMI
FHA mortgage insurance
- FHA requires two forms of insurance: an up-front mortgage insurance premium (UFMIP) that is typically around 1.75% of the loan amount, and an annual mortgage insurance premium (MIP) paid monthly.
- For loans with case numbers assigned on or after June 3, 2013, how long MIP lasts depends on your original loan-to-value (LTV) and loan term. Some loans require MIP for the life of the loan if the original LTV is above 90%; others may end after 11 years when the original LTV is 90% or less. You can review policy details in the FHA Single Family Housing Policy Handbook 4000.1.
Conventional private mortgage insurance
- Conventional loans use private mortgage insurance (PMI) when your down payment is under 20%.
- PMI can be cancelled once your equity reaches about 20% (borrower-requested) and must automatically terminate at about 22% equity under federal law, subject to payment history and verification. The CFPB’s guide to PMI cancellation explains how this works.
- You can choose borrower-paid monthly PMI, a single up-front premium, or lender-paid PMI that is built into your rate.
Credit score and DTI guidelines
FHA underwriting
- FHA is more flexible with credit history and lower scores.
- Lenders often allow higher debt-to-income (DTI) ratios when you have compensating factors like strong savings or stable income.
- Individual lenders can add their own “overlays,” so approvals may vary.
Conventional underwriting
- Conventional loans generally require stronger credit. Many programs look for scores around 620 or higher, with better pricing at higher scores.
- Typical DTI caps are around the mid-40% range, with some flexibility for well-qualified borrowers.
- With higher credit and stable income, conventional pricing often beats FHA over time.
Appraisals and property standards
FHA property rules
- FHA appraisals include HUD’s minimum property standards to ensure the home is safe, sound, and secure.
- Appraisers can call out repairs that must be completed before closing. That can slow timelines or cause sellers to hesitate.
- You can review FHA appraisal and property guidance in the FHA Handbook 4000.1.
Conventional appraisal approach
- Conventional appraisals focus on market value and basic habitability.
- While lenders still require a safe, marketable property, repair requests are typically less prescriptive than FHA.
- In competitive Ballwin areas, sellers often view conventional financing as lower risk for appraisal-related repairs.
Loan limits in St. Louis County
Loan limits can shape your options. Ballwin is in St. Louis County, where both FHA and conforming (Fannie Mae/Freddie Mac) limits update each year. If the price you’re targeting exceeds a program’s limit, you may need a larger down payment, a conventional jumbo loan, or a different structure.
- Check St. Louis County’s current FHA limits using HUD’s official FHA loan limits lookup.
- Review conforming loan limits with the FHFA’s conforming loan limits resource.
Cost picture: what to compare
- Interest rate: FHA can price well for buyers with lower credit; conventional often rewards higher scores with lower rates.
- Up-front costs: FHA usually includes UFMIP that can be financed; conventional may involve PMI only if you choose a single-premium option.
- Monthly costs: Conventional PMI can be removed with equity; FHA MIP often lasts longer depending on your original LTV and loan term.
- For a fair comparison, ask your lender for side-by-side Loan Estimates that show total monthly cost and cash to close for each option.
When FHA fits best
- You want a low down payment and have limited savings.
- Your credit score or history may not qualify for competitive conventional pricing.
- You plan to occupy the home as your primary residence and may use gift funds for down payment.
- You are buying a home comfortably within FHA loan limits and expect to refinance later if it saves money.
When conventional fits best
- You have strong credit and stable income and can put 5% to 20% down.
- You want mortgage insurance that can be removed as you build equity.
- You are writing offers in competitive neighborhoods where sellers may prefer conventional financing.
- You are shopping above FHA limits and considering conforming or jumbo solutions.
Winning offers in Ballwin
Ballwin and nearby suburbs can be competitive. Conventional and cash offers often look “cleaner” to sellers. If you are using FHA, you can still stand out by tightening timelines where feasible, providing a strong local preapproval, and being clear about which repairs are truly essential.
Consider these tactics with your agent’s guidance:
- Increase earnest money to show commitment.
- Use reasonable inspection windows and prioritize critical repairs.
- If appropriate for your situation, consider appraisal-gap coverage or an escalation clause, and understand the risks before you offer.
Local programs and resources
If you are a first-time buyer or need help with cash to close, Missouri and local programs may help. Look into Missouri Housing programs for potential down payment assistance or education requirements. For low-down-payment conventional options, review Fannie Mae HomeReady and Freddie Mac Home Possible to see if you meet their income, education, and occupancy rules.
For loan limits, always verify the most recent year:
- FHA limits for St. Louis County: HUD loan limits lookup
- Conforming limits: FHFA conforming loan limits
How to decide your best path
Start with your budget and timeline. If you need the most flexible approval with a minimal down payment and you are buying within FHA limits, FHA can be a smart first step. If you have stronger credit or plan to hold the home long term, conventional may cost less over time because you can remove PMI.
Next, run the numbers. Ask at least two lenders for Loan Estimates on both FHA and conventional scenarios for the same price, rate lock, and closing date. Compare total monthly payment, cash to close, and break-even timelines if you plan to refinance. Then match the financing to your offer strategy in Ballwin so you can compete with confidence.
Ready to shop smarter and write stronger offers in Ballwin? Connect with the local team that pairs neighborhood experience with a smooth, systems-driven process. Reach out to Show + Sell STL to plan your purchase, compare loan paths with trusted lenders, and position your offer to win.
FAQs
Can I use FHA with a credit score under 600?
- Possibly. FHA is more flexible than conventional, but lenders set their own overlays. Scores below 580 often require a larger down payment, and full approval depends on your full file.
How long does FHA mortgage insurance last?
- For newer FHA loans, duration depends on your original LTV and loan term. Many loans with original LTV above 90% require MIP for the life of the loan; others may end after 11 years. See the FHA Handbook 4000.1 for details.
When can I remove PMI on a conventional loan?
- You can usually request cancellation around 80% LTV and it automatically terminates near 78% LTV, subject to guidelines and payment history. Review procedures in the CFPB’s PMI guide.
Will sellers in Ballwin accept FHA offers?
- Many sellers prefer conventional or cash due to fewer repair concerns, but FHA buyers can compete by tightening timelines, providing a strong preapproval, and focusing on essential repairs only.
What if the home price is above the FHA limit for St. Louis County?
- You may need to bring more cash to reduce the loan size, use a conventional jumbo loan, or focus on homes within the current FHA limit. Check current limits using the HUD loan limits lookup and the FHFA conforming loan limits page.
