The FHA vs. conventional loan question is one of the most common decisions first-time buyers face — and in the Seattle–Eastside market, it has some specific wrinkles that don't apply in most other parts of the country. Eastside home prices regularly exceed FHA loan limits, which changes the calculus in ways that matter.

Here's a complete breakdown of both loan types, how they compare, and how to think about the choice in the context of this specific market.

What is a conventional loan?

A conventional loan is any mortgage that isn't backed by a government agency — it conforms to the guidelines set by Fannie Mae or Freddie Mac (for conforming loans) or exists outside those guidelines (for jumbo loans).

Key characteristics:

• Down payment: as low as 3% for qualified first-time buyers, typically 5–20%
• Private Mortgage Insurance (PMI) required if down payment is below 20% — but PMI can be cancelled once you reach 20% equity
• Credit score: typically 620 minimum, with significantly better rates at 740+
• Loan limits: $806,500 for a single-family home in King County in 2026 (conforming limit; above this becomes a jumbo loan)
• No property condition requirements beyond standard lender guidelines
• Can be used for primary residences, second homes, and investment properties

What is an FHA loan?

An FHA loan is backed by the Federal Housing Administration, a government agency. The government guarantee allows lenders to offer more favorable terms to buyers with lower credit scores or smaller down payments.

Key characteristics:

• Down payment: as low as 3.5% with a credit score of 580+; 10% minimum with scores of 500–579
• Mortgage Insurance Premium (MIP) required regardless of down payment — and it cannot be cancelled for the life of the loan if you put down less than 10%
• Credit score: 500 minimum (though most lenders require 580+ for the 3.5% down option)
• Loan limits: $977,500 for a single-family home in King County in 2026 (higher than conforming due to King County's high-cost area designation)
• Property condition requirements: the home must meet FHA's Minimum Property Standards — a more extensive set of requirements than conventional loans
• Primary residences only — FHA loans cannot be used for investment properties or second homes

The loan limit question in the Seattle–Eastside market

This is where the Seattle and Bellevue context matters significantly.

In most of the country, FHA loan limits are lower than conforming conventional loan limits, which makes FHA less useful for higher-priced homes. In King County, because it's designated a high-cost area, the FHA loan limit is actually $977,500 — higher than the conforming conventional limit of $806,500.

What this means in practice: in King County, FHA loans can be used for homes priced up to approximately $1M (with a 3.5% down payment) — which covers a meaningful portion of the Eastside market, including townhomes in Redmond, condos in Bellevue, and some single-family homes in Kent and Auburn.

However, for the core Eastside single-family market — homes in Bellevue, Kirkland, and Redmond priced at $1M–$1.8M — you're above FHA limits, and a conventional or jumbo loan is required regardless.

The mortgage insurance comparison — this is where the real difference lives

This is the most important factor most buyers underestimate when comparing FHA and conventional.

FHA Mortgage Insurance Premium (MIP):

• Upfront MIP: 1.75% of the loan amount, added to the loan balance at closing
• Annual MIP: approximately 0.55–0.85% of the loan balance per year, paid monthly
• Cannot be cancelled for the life of the loan if you put down less than 10%
• If you put down 10% or more, MIP cancels after 11 years

Conventional PMI:

• No upfront component (in most cases)
• Annual cost: approximately 0.5–1.5% of the loan balance per year depending on credit score and down payment
• Automatically cancels at 20% equity — by law, servicers must remove PMI when your loan balance reaches 80% of the original home value
• Can be cancelled earlier by requesting a new appraisal that establishes 20% equity

The practical implication: On a $600,000 loan, FHA's annual MIP at 0.65% costs approximately $3,900/year. Conventional PMI at 0.8% on the same loan is approximately $4,800/year — but that PMI goes away when you hit 20% equity. The FHA MIP stays for the life of the loan.

For buyers who plan to be in their home for more than 5–7 years, the lifetime cost of FHA's non-cancellable MIP often exceeds the benefit of its lower credit requirements.

When FHA makes more sense

FHA is often the better choice when:

Your credit score is below 700. Conventional PMI rates are heavily credit-score-dependent. With a score below 680, conventional PMI can be expensive enough that FHA's fixed MIP structure becomes more competitive. FHA's rate is also less sensitive to credit score variation — a 620 and a 700 borrower get similar FHA terms, while the conventional rate gap is significant.

You have a 3.5% down payment and nothing more. Conventional loans allow 3% down, but the best rates and PMI costs on conventional require more cash. FHA's 3.5% down option is a genuine minimum-down entry point.

You're buying a home priced under $600K. At lower price points, the long-term MIP cost is more manageable and the credit flexibility of FHA is more valuable.

When conventional makes more sense

Conventional is usually better when:

Your credit score is 720+. Conventional rates and PMI costs improve dramatically at higher credit scores. A 750 FICO borrower doing a conventional loan often gets better total cost than FHA even with a small down payment.

You're buying above FHA loan limits. In King County, homes above approximately $977,500 require conventional or jumbo financing regardless.

You plan to build equity quickly. Conventional PMI cancels at 20% equity. FHA MIP doesn't. In an appreciating market like the Eastside, reaching 20% equity within 5–7 years is realistic for most buyers — meaning conventional's PMI burden is temporary in a way that FHA's isn't.

The home has condition issues. FHA's Minimum Property Standards reject homes with significant deferred maintenance, health and safety issues, or structural problems. Conventional loans have fewer property condition requirements, giving buyers more flexibility when purchasing a fixer or an older home.

You're in a competitive offer situation. Sellers and their agents sometimes prefer conventional offers over FHA because of FHA's appraisal and property condition requirements. In a multiple-offer situation on the Eastside, a conventional offer can have a slight advantage.

The jumbo loan option for higher-priced Eastside homes

For homes above $806,500 in King County, you're in jumbo loan territory for conventional financing. Jumbo loans have their own characteristics:

• Typically require a minimum 10–20% down payment
• Credit score requirements are generally higher — 700+ is typical, 720+ for best rates
• Rate is set by individual lenders rather than conforming to Fannie/Freddie guidelines
• No PMI in most jumbo loan structures, but the rate reflects the lender's risk instead

For buyers purchasing at $1M+ on the Eastside, jumbo is often the primary financing conversation.

The right answer for your situation

There's no universal answer to FHA vs. conventional — the right choice depends on your specific credit score, down payment, the price of the home you're buying, and how long you plan to stay. A good lender will model both scenarios side by side so you can see the real numbers.

At Tribeca NW, we work closely with experienced local lenders who understand the Eastside market and can help our buyer clients understand their options before they start making offers. If you'd like a referral to a lender we trust, reach out.

Connect with a Tribeca NW buyer agent →

Note: Loan limits, MIP rates, and program requirements are subject to change. Always verify current figures with a licensed lender before making financing decisions. This article is for informational purposes and does not constitute financial or legal advice.

Tribeca NW Real Estate serves buyers across Bellevue, Kirkland, Redmond, and the greater King County area. 1,508 homes closed. 800+ five-star reviews on Google and Zillow.