Conventional and FHA loans can both work well, but the better choice depends on your down payment, credit profile, and how mortgage insurance will affect your costs over time. While conventional loans are often more common in Washington and nationwide, popularity is only part of the story. What matters most is which loan best fits your financial situation and homebuying goals.
We’ve written in the past how policy changes at Freddie Mac and Fannie Mae have made conventional home loans more competitive with FHA loans, especially when it comes to down payments. In this article, we’ll explain why more borrowers often choose conventional financing, and what that means when you’re comparing conventional vs. FHA options in Washington and across the nation.
National and Washington-focused mortgage discussions often show conventional loans accounting for a larger share of closed-end first-lien home lending than FHA loans. For national context, the FHFA’s National Mortgage Database (NMDB) is a de-identified, loan-level database built from a nationally representative 5 percent sample of closed-end first-lien residential mortgages. HUD also publishes reporting that estimates the role of the FHA single-family insurance program within the broader U.S. mortgage market.
That context is useful, but it should not be treated as a universal recommendation. Market share can show what many borrowers used in a given place or period, while your best option still depends on factors like down payment flexibility, mortgage insurance, and qualification fit.
Conventional and FHA loans also differ in basic structure. FHA loans are mortgage loans insured by the Federal Housing Administration, which is part of HUD. Conventional loans, on the other hand, are not insured or guaranteed by the government and are offered through the private sector.
More home buyers in Washington and elsewhere in the country are turning to conventional loans when buying a home. And that’s not surprising when you consider how the minimum down payment for conventional mortgages has dropped in recent years.
Check out our mortgage loan limit tool for conventional, FHA, and VA loan, as well as the 2026 conventional loan limits for Washington State.
There was a time when most conventional loans required a down payment of 5% or more. FHA, on the other hand, has long offered a down payment as low as 3.5% of the purchase price or appraised value. So in the past, a lot of home buyers in Washington flocked to the FHA program to enjoy a lower upfront investment.
But that has changed. Fannie Mae and Freddie Mac, the two corporations that buy loans from lenders, have both increased their maximum allowable loan-to-value (LTV) ratios to 97%. That means eligible borrowers who use a conventional loan can now make down payments as low as 3%. In other words, Freddie and Fannie have put themselves in direct competition with FHA.
This is probably a big reason why FHA’s loan share in Washington State and nationwide has declined.
It’s also worth noting that the mortgage insurance applied to FHA loans stays with the borrower for as long as they keep the loan (at least in most cases). In contrast, private mortgage insurance for a conventional loan can usually can be cancelled once the homeowner has reached a certain equity level. And those borrowers who put down 20% or more on a conventional loan can typically avoid mortgage insurance altogether. So there’s a lot to consider.
This is just one way that the mortgage market has changed over the last few years. Home buyers in Washington have a lot of factors to consider when choosing a financing path. That’s why it’s so important to speak to a knowledgeable loan officer (like ours) about your options.
A conventional loan may be a better fit if you have strong credit, can qualify for a low-down-payment conventional option, or want the possibility of cancelling mortgage insurance later. For some buyers, that combination can make conventional financing more attractive over time.
FHA may still be the better fit for borrowers who need more flexibility on credit score, want a down payment as low as 3.5 percent, or have a credit profile that does not line up as easily with conventional underwriting. In general consumer guidance, FHA loans allow lower credit scores than most conventional loans, while conventional loans often set a higher minimum credit threshold.
The practical takeaway is that conventional is not automatically better just because more borrowers use it. FHA can still be a useful option when its qualification flexibility helps a buyer become a homeowner sooner. The right choice comes down to eligibility, total cost, and how long you expect to keep the loan.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
Neither option is automatically better for every borrower. A conventional loan may fit better if you have strong credit, qualify for a low-down-payment conventional program, or want the possibility of canceling mortgage insurance later. An FHA loan may be a better fit if you need more flexibility with credit or qualification.
Many borrowers choose conventional loans because minimum down payment options have become more competitive, with some eligible buyers able to put down as little as 3%. Conventional financing can also be attractive because private mortgage insurance may be canceled later once enough equity is reached, and borrowers who put down 20% or more can often avoid mortgage insurance altogether.
No. Eligible borrowers can sometimes qualify for a conventional loan with as little as 3% down. A 20% down payment is not required, but putting down 20% or more can help you avoid mortgage insurance on a conventional loan.
FHA loans have long allowed a down payment as low as 3.5%. Conventional loans have become more competitive because eligible borrowers may qualify with as little as 3% down. That means the gap between the two programs is much smaller than it used to be.
For FHA loans, mortgage insurance usually stays with the borrower for as long as the loan is kept, in most cases. For conventional loans, private mortgage insurance can usually be canceled after the homeowner reaches a certain equity level. Conventional borrowers who put down 20% or more can typically avoid mortgage insurance from the start.
A common drawback of an FHA loan is that mortgage insurance usually remains in place for as long as the borrower keeps the loan, in most cases. Depending on your credit profile, down payment, and how long you expect to keep the loan, that can make FHA financing cost more over time than a conventional option.
A conventional loan may be harder to qualify for if your credit profile does not line up as easily with conventional underwriting. While low-down-payment options are available for some eligible borrowers, conventional loans often have a higher minimum credit threshold than FHA loans.
FHA may make more sense when a borrower needs more flexibility on credit score, wants a down payment as low as 3.5%, or has a credit profile that does not fit conventional underwriting as easily. For some buyers, that flexibility can make FHA the more practical path to homeownership.
It may be possible to move from FHA to conventional financing later by refinancing, depending on your eligibility and financial situation at that time. Borrowers sometimes consider that route if they want to replace FHA mortgage insurance with a conventional loan structure.
The same basic differences between conventional and FHA loans apply in Washington and nationwide. In both Washington and the broader U.S. market, the right choice depends on factors like down payment, credit profile, mortgage insurance, and overall qualification fit rather than market share alone.
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