FHA vs. Conventional vs. VA Loans in Montgomery County: Which Is Right for You?
The loan you choose affects your down payment, monthly cost, and offer competitiveness. Here's a plain-English breakdown of the three main loan types for buyers in Maryland — and when each one makes the most sense.
Edward Dumitrache
April 24, 2026
Choosing the right loan type is one of the first decisions in a home purchase, and it affects more than just your rate — it affects your down payment requirement, monthly cost, offer competitiveness with sellers, and long-term flexibility. Here's a clear breakdown of the three most common loan types for buyers in Montgomery County.
Conventional Loans
Conventional loans are mortgages not backed by a federal agency. They're issued and held by private lenders, though most conform to standards set by Fannie Mae and Freddie Mac (conforming loans).
Down payment: 3% minimum (some programs), more commonly 5–20%. The less you put down, the more you'll pay for private mortgage insurance (PMI).
PMI: Required if your down payment is less than 20%. PMI typically runs 0.5–1.5% of the loan amount per year and drops off automatically once you've reached 20% equity. On a $500,000 loan at 1% PMI: ~$5,000/year or ~$417/month.
Credit requirements: Generally 620+ minimum, with better rates available at 740+.
Condo eligibility: Conventional loans work with most condo buildings, including those that don't meet FHA approval requirements. This is a meaningful advantage in the DC Metro condo market.
Best for: Buyers with 10–20% down and good credit who want flexibility in property type and want to avoid the upfront MIP of FHA.
FHA Loans
FHA loans are backed by the Federal Housing Administration and designed to make homeownership accessible to buyers with lower down payments or less-than-perfect credit.
Down payment: 3.5% for credit scores 580+. 10% if credit score is 500–579.
Mortgage insurance: Two components — an upfront MIP (mortgage insurance premium) of 1.75% of the loan amount added to the loan balance, plus annual MIP of 0.45–1.05% depending on loan term, amount, and LTV. Unlike conventional PMI, FHA MIP on loans with less than 10% down lasts for the life of the loan.
On a $450,000 FHA loan: upfront MIP ~$7,875 (rolled into loan), annual MIP ~$5,400–$9,000/year depending on terms.
Credit requirements: 580+ for 3.5% down; more lenient than conventional on overall credit profile.
Condo restrictions: FHA requires the entire condo building to be FHA-approved. Many buildings in Montgomery County and DC are not approved, limiting your options significantly. Always check FHA approval status on any condo before getting attached to it.
Best for: First-time buyers with limited savings or credit challenges who need the lowest possible down payment. Less competitive in multiple-offer situations because FHA appraisals have additional requirements sellers dislike.
VA Loans
VA loans are backed by the Department of Veterans Affairs and available to eligible veterans, active-duty service members, and surviving spouses.
Down payment: 0% — no down payment required.
PMI: None. VA loans do not require private mortgage insurance regardless of down payment.
VA Funding Fee: A one-time fee that replaces PMI, typically 2.15–3.3% of the loan amount depending on down payment and whether it's a first use. Veterans with service-connected disabilities are exempt. Can be rolled into the loan.
Credit requirements: VA doesn't set a minimum, but most lenders want 620+.
Condo restrictions: VA loans have their own condo approval list, separate from FHA. Check VA approval status on any condo.
Offer competitiveness: VA loans sometimes face seller resistance due to VA appraisal requirements and a misconception that they're harder to close. In reality, VA loans have similar closing timelines to conventional. Educating listing agents (and sometimes sellers) is sometimes part of using a VA loan in a competitive market.
Best for: Eligible veterans and service members — this is one of the best mortgage programs available. Zero down payment with no PMI is a significant financial advantage, especially in Montgomery County's higher price range.
Side-by-Side Comparison
| Feature | Conventional | FHA | VA | |---|---|---|---| | Min. down payment | 3% | 3.5% | 0% | | Mortgage insurance | PMI if <20% down | MIP always (if <10% down, life of loan) | None (funding fee instead) | | Min. credit score (typical) | 620+ | 580+ | 620+ (lender) | | Condo eligibility | Most buildings | FHA-approved only | VA-approved only | | Best for | Good credit, 10%+ down | Limited savings/credit | Veterans |
Which Loan Makes Sense for Montgomery County Prices?
At $606,750 median in Montgomery County, the down payment math matters:
- 3.5% FHA down payment: ~$21,000
- 5% conventional: ~$30,000
- 10% conventional: ~$60,000
- 20% conventional (no PMI): ~$121,000
Most first-time buyers in this price range use FHA or lower-down-payment conventional. The choice between them depends largely on credit score, how long you plan to hold the property (FHA MIP is harder to get rid of), and whether the specific property is FHA-approved.
Frequently Asked Questions
Is FHA or conventional better for first-time buyers?
Depends on your credit score and down payment. If you have 10%+ down and good credit (720+), conventional will typically be cheaper long-term because PMI falls off. If you have less than 10% down or a credit score below 660, FHA may offer better terms or be the only option.
Can you use a VA loan in Montgomery County?
Yes. VA loans work in Maryland with no down payment required for eligible veterans. The higher loan limits (VA doesn't impose county limits above baseline) work well for Montgomery County's price range.
What is the conforming loan limit in Montgomery County, MD?
Montgomery County is in the Washington-Arlington-Alexandria metro area, which qualifies for higher conforming loan limits than the national baseline. Verify current limits with your lender — they adjust annually.
Can I use FHA to buy a condo in Montgomery County?
Only if the specific condo building is FHA-approved. Check the HUD condo approval database before falling in love with a specific unit. Many buildings are not approved, which would require conventional financing.
How do I choose between FHA and conventional for a first home purchase?
Compare the total cost over your expected hold period (including upfront fees, PMI/MIP, and rate differences) rather than just the monthly payment. FHA's upfront MIP adds to your loan balance and MIP may last longer. A mortgage broker can run these comparisons for your specific numbers.
Not Sure Which Loan Is Right for You?
Loan type affects your offer competitiveness, your monthly cost, and your long-term equity position. I connect buyers with trusted lenders and help them understand the decision before they fall in love with a home.
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