Trying to decide between FHA and conventional financing for a home in Lexington? You are not alone. The right loan can lower your monthly payment, help you qualify with confidence, and shape how quickly you build equity. In this guide, you will compare the basics, see real payment examples at common Lexington price points, and learn the steps to get pre-approved. Let’s dive in.
FHA vs. conventional: quick overview
Down payment
- FHA: Minimum 3.5% down with a credit score of 580 or higher. Scores 500–579 often require 10% down. You can review FHA program details on HUD’s site.
- Conventional: As low as 3% down with first-time buyer programs like Fannie Mae HomeReady or Freddie Mac Home Possible, subject to income and occupancy rules.
Credit and underwriting
- FHA is generally more flexible with lower credit scores and recent credit hiccups.
- Conventional usually prefers 620 and up, with better pricing as scores rise.
Mortgage insurance
- FHA: You pay an upfront mortgage insurance premium of 1.75% of the base loan and an annual mortgage insurance premium charged monthly. See FHA insurance basics on HUD.
- Conventional: Private mortgage insurance applies if you put less than 20% down. It varies with credit score and loan-to-value, and it can be cancelled as you build equity. The CFPB explains PMI.
Appraisal and property condition
- FHA appraisals include minimum property standards. Certain repairs may be required before closing.
- Conventional appraisals focus on market value, with more flexibility for minor defects.
Loan limits
- Both FHA and conforming loans have county-based limits. Check conforming limits via the FHFA and FHA limits on HUD’s county page.
What this means in Lexington
Many Lexington homes often fall between roughly 200,000 and 400,000 dollars depending on neighborhood, lot size, and home age. In this range, the difference between 3% or 3.5% down and 20% down is significant for monthly costs. Mortgage insurance, property taxes, and homeowners insurance will shape your total payment.
If you focus on older homes or properties that need work, FHA appraisal requirements could trigger repairs before closing. With conventional loans, minor issues may be easier to handle in a repair addendum or escrow. Also remember that tax rates vary by location within Lexington County, so factor that in when comparing homes.
Monthly payment examples at Lexington prices
The examples below use a 30-year fixed loan at a 6.5% rate with a principal and interest estimate of about 0.00632 times the loan balance per month. FHA figures include 1.75% upfront MIP financed into the loan and an annual MIP of 0.85%. Conventional PMI is shown at 0.50% annually. Your actual rate and insurance costs may differ, but these show how the numbers work.
Example: 200,000 dollar purchase
- FHA 3.5% down: 7,000 dollars down. Base loan 193,000 dollars. With upfront MIP, financed loan is about 196,378 dollars.
- Principal and interest about 1,241 dollars per month
- Monthly MIP about 137 dollars
- Total about 1,378 dollars
- Conventional 3% down: 6,000 dollars down. Loan 194,000 dollars.
- Principal and interest about 1,226 dollars
- PMI about 81 dollars
- Total about 1,307 dollars
- Conventional 20% down: 40,000 dollars down. Loan 160,000 dollars.
- Principal and interest about 1,012 dollars
- No PMI
Example: 300,000 dollar purchase
- FHA 3.5% down: Base loan 289,500 dollars. Financed loan about 294,566 dollars.
- Principal and interest about 1,863 dollars
- Monthly MIP about 205 dollars
- Total about 2,068 dollars
- Conventional 3% down: Loan 291,000 dollars.
- Principal and interest about 1,839 dollars
- PMI about 121 dollars
- Total about 1,960 dollars
- Conventional 20% down: Loan 240,000 dollars.
- Principal and interest about 1,517 dollars
- No PMI
Example: 400,000 dollar purchase
- FHA 3.5% down: Base loan 386,000 dollars. Financed loan about 392,755 dollars.
- Principal and interest about 2,484 dollars
- Monthly MIP about 273 dollars
- Total about 2,757 dollars
- Conventional 3% down: Loan 388,000 dollars.
- Principal and interest about 2,451 dollars
- PMI about 162 dollars
- Total about 2,613 dollars
- Conventional 20% down: Loan 320,000 dollars.
- Principal and interest about 2,023 dollars
- No PMI
Which loan may fit you
Consider FHA if
- Your credit score is on the lower side and you want flexible underwriting.
- You plan to use gift funds for part of your down payment and closing costs.
- You want a path to buy now, then consider refinancing later to remove FHA mortgage insurance.
Consider conventional if
- Your credit score is 620 or higher and you can secure competitive PMI pricing.
- You can put 20% down now, or expect to reach 20% equity soon to remove PMI.
- You prefer more flexibility on property condition and appraisal repairs.
How mortgage insurance works
FHA mortgage insurance
With FHA, you pay two forms of insurance. There is an upfront mortgage insurance premium equal to 1.75% of the base loan that many buyers finance into the loan amount. You also pay an annual mortgage insurance premium monthly that, for many newer 30-year FHA loans with higher loan-to-value ratios, lasts for the life of the loan. You can review FHA insurance basics on HUD.
Conventional PMI
With conventional loans, private mortgage insurance applies when you put less than 20% down. PMI cost depends on your credit score and loan-to-value. PMI can be cancelled at 80% loan-to-value upon request and must end automatically at 78% loan-to-value, if you are current on payments. See the CFPB’s guide to PMI.
Local programs and resources
- Down payment help: South Carolina buyers can explore state offerings through SC Housing. Some programs can pair with FHA or conventional financing, subject to rules.
- First-time buyer programs: Learn about HomeReady and Home Possible for 3% down options.
- Counseling support: You can connect with a local HUD-approved housing counselor through the HUD counselor finder.
Steps to get pre-approved in Lexington
- Check your credit. Pull your reports, correct errors, and note your scores.
- Speak with at least two lenders. Choose one with strong FHA experience and one that offers low-down conventional programs. To confirm FHA participation, use the HUD lender list.
- Request comparable Loan Estimates. Ask for FHA and conventional quotes using the same assumptions for taxes and insurance.
- Verify program limits. Confirm Lexington County FHA and conforming limits with your lender or check the FHFA and HUD limits page.
- Ask detailed questions. Cover interest rate and APR, mortgage insurance type and cost, maximum debt-to-income, seller concession limits, condo eligibility, and what appraisal repairs could be required for FHA.
When you are ready to compare homes that fit your monthly budget, reach out for local guidance. From narrowing neighborhoods to crafting strong, finance-forward offers, you will have clear, steady support every step of the way. Connect with Mackenzie Robertson to start your plan.
FAQs
What is the minimum down payment for FHA and conventional in Lexington?
- FHA allows 3.5% down with a 580 or higher credit score, and 10% down for scores between 500 and 579. Conventional options can go to 3% down through first-time buyer programs like HomeReady or Home Possible.
How do FHA mortgage insurance and conventional PMI compare?
- FHA includes an upfront 1.75% premium plus monthly mortgage insurance that often lasts for the life of the loan. Conventional PMI varies with credit and loan-to-value and can be cancelled as you reach 20% equity. Learn more via HUD and the CFPB PMI guide.
What are loan limits for Lexington County?
- Both FHA and conventional conforming loans have county-based limits. Ask your lender to confirm the current figures or review the FHFA for conforming limits and HUD’s limit page for FHA.
Can I use South Carolina down payment assistance with FHA or conventional?
- Yes, many buyers pair state assistance with either loan type if they meet program rules. Start with SC Housing to check eligibility and options.
Will an FHA appraisal make it harder to buy an older Lexington home?
- FHA appraisals include health, safety, and habitability checks. If a home needs certain repairs, FHA may require fixes before closing, while conventional financing may allow more flexibility for minor issues.
How can I remove mortgage insurance later?
- Conventional PMI can end automatically at 78% loan-to-value or be cancelled at 80% upon request if you are current and meet conditions. FHA mortgage insurance on many recent loans remains for the life of the loan, so refinancing to conventional is a common path once you have enough equity.
