You found a house in St. Louis, the seller accepted the offer, and your agent says the next step is a pre-approval letter or a full application. The loan officer asks which program you want: conventional or FHA. Both can close a purchase. They do not cost the same, they do not appraise the same way, and they do not treat seller concessions the same way. Picking the wrong one after you are under contract can cost money or kill the timeline.
Sean Zalmanoff at Better Rate Mortgage works with St. Louis buyers who are already under contract and need a clear side-by-side before they commit to a program. This is education. It is not a rate quote, not a commitment to lend, and not a guarantee of any specific payment. Program availability, pricing, and underwriting guidelines change. The numbers on your loan estimate will be yours, not the examples below.
Down payment: the number everyone asks first
Conventional loans can close with as little as 3% down on a primary residence for qualified buyers. FHA loans require a minimum of 3.5% down with a credit score of 580 or above. At first glance the difference looks small. On a $250,000 purchase in Kirkwood or Maplewood, 3% is $7,500 and 3.5% is $8,750. That $1,250 gap matters less than people think, because the real cost difference is in the mortgage insurance math and the appraisal rules.
If you have 5% or more to put down, conventional starts to pull ahead on monthly cost for most credit profiles. At 10% down the gap widens. At 20% down, conventional has no monthly mortgage insurance at all. FHA mortgage insurance does not drop off at 20% equity the way conventional private mortgage insurance (PMI) does.
Mortgage insurance: the cost that stays or the cost that leaves
Conventional PMI is cancellable. Once you reach 20% equity through payments, appreciation, or a combination, you can request removal. At 22% equity on the original schedule, servicers are required to remove it automatically. The monthly PMI rate depends on credit score, loan-to-value, and the insurer. Stronger credit pays less.
FHA mortgage insurance has two parts. There is an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, usually financed into the balance. Then there is an annual premium divided into monthly payments. For most FHA loans originated today with less than 10% down, that annual premium stays for the life of the loan. It does not cancel at 20% equity. The only way to remove it is to refinance into a conventional loan once you have enough equity and credit.
For a St. Louis buyer putting 5% down on a $275,000 home, the difference between a conventional PMI that cancels in a few years and an FHA annual premium that stays for 30 years is thousands of dollars over the life of the loan. That is usually the single biggest cost difference between the two programs, and it is the one most buyers do not hear about until after closing.
Appraisal: what FHA requires that conventional does not
Both programs require an appraisal. Conventional appraisals focus on market value. FHA appraisals also check minimum property requirements set by HUD. The FHA appraiser looks for health and safety issues: peeling paint on pre-1978 homes, missing handrails, broken windows, roof problems, exposed wiring, and water damage. If the appraiser flags a condition, the seller has to fix it before closing or the loan cannot fund.
In parts of St. Louis City, older neighborhoods in South City, Bevo Mill, Tower Grove, and north-county areas with deferred maintenance, FHA appraisal conditions are common. A conventional appraisal on the same house might note the condition but not require a repair. That does not mean the house is safe to buy without repairs. It means the lender is not forcing the seller to fix it before closing. The buyer can negotiate repairs or accept the condition.
If you are buying a flip or a home that needs cosmetic work, FHA appraisal requirements can slow the deal or kill it if the seller refuses to make repairs. Conventional gives you more flexibility on property condition, but that flexibility means you are accepting whatever the inspection finds.
Seller concessions: how much the seller can contribute to your closing costs
FHA allows the seller to contribute up to 6% of the sale price toward the buyer’s closing costs. Conventional allows 3% when the buyer puts less than 10% down, 6% at 10-24% down, and 9% at 25% or more down. Most St. Louis first-time buyers are in the less-than-10%-down bracket, so conventional limits seller concessions to 3%.
That matters in a market where buyers are asking sellers to cover closing costs as part of the negotiation. On a $230,000 house, FHA allows up to $13,800 in seller concessions. Conventional at 5% down allows up to $6,900. If you need the seller to cover a large chunk of closing costs, FHA gives you more room. If you are bringing enough cash to cover your own closing costs, the concession cap does not matter and conventional’s lower ongoing MI cost is usually the better deal.
Credit score: where the line moves
FHA is available down to a 580 credit score with 3.5% down, and some lenders go to 500 with 10% down. Conventional loans technically start at 620, but pricing improves significantly above 680, 720, and 740. A buyer with a 640 credit score in St. Louis will usually pay more in PMI on a conventional loan than the same buyer would pay in FHA mortgage insurance. A buyer with a 740 score will almost always pay less on conventional.
Credit score also affects the interest rate. FHA rates tend to be more uniform across the score range. Conventional rates reward higher scores more aggressively. Sean Zalmanoff runs both scenarios on the actual credit profile so the comparison uses real numbers, not a brochure average.
Closing timeline and contract deadlines
FHA loans can take longer to close when appraisal conditions require repairs. The repair has to be completed, then re-inspected, and the appraiser has to clear the condition before the lender can issue a clear to close. In a competitive St. Louis market where closing dates are tight, that delay can put the contract at risk.
Conventional closings are generally faster when the appraisal comes back clean. No HUD property conditions, no mandatory re-inspection. If you are under contract with a 30-day close and the house needs work, conventional is usually the safer bet for the timeline. If the house is in good shape and you need seller concessions or have a lower credit score, FHA may close on the same schedule without issues.
The financing contingency in your contract protects you if the loan falls through because of an appraisal or underwriting problem. But a delayed close is not the same as a failed close. Sellers who have already packed the truck are not patient about extensions. Talk to Better Rate Mortgage about realistic timelines before your agent writes the contract dates.
When conventional is usually the better fit in St. Louis
Conventional tends to win when the buyer has a 700+ credit score, can put 5% or more down, does not need more than 3% in seller concessions, and the property is in reasonable condition. The PMI cancels, the appraisal is simpler, and the closing timeline is more predictable. Most move-up buyers in West County, Chesterfield, Ballwin, and Wildwood fit this profile.
Conventional is also the standard choice for buyers who plan to build equity quickly through extra payments or who expect the property to appreciate. Once PMI drops off, the monthly cost difference compared to FHA grows every month.
When FHA is usually the better fit in St. Louis
FHA tends to win when the buyer has a credit score below 680, needs more than 3% in seller concessions, or is putting the minimum down and wants the lowest upfront cash requirement. First-time buyers in the city, Florissant, Ferguson, or Hazelwood who are stretching to get into a home often land on FHA because the combination of lower score tolerance and higher seller concessions makes the deal work.
FHA is also a better fit when the buyer plans to refinance within a few years anyway. If you expect your credit to improve or your income to rise, you can start with FHA and refinance into conventional once the numbers support it. The upfront MIP is a sunk cost, but the monthly premium stops when you refinance out.
What to compare before you lock a rate
Do not pick a program based on one number. Ask for a side-by-side loan estimate that shows:
- Monthly principal and interest on each program at the same purchase price
- Monthly mortgage insurance on each, and when (or whether) it cancels
- Total cash to close, including down payment, prepaids, and lender fees
- Maximum seller concessions allowed, and whether your contract already includes them
- Appraisal requirements for the specific property you are buying
Better Rate Mortgage runs both estimates on the same property and the same credit profile so the comparison is real. Contact Sean Zalmanoff to discuss your situation before you lock. Start at betterratemortgage.com.
FAQ
Can I switch from FHA to conventional after I am under contract?
Sometimes. If the appraisal is already ordered under FHA, switching to conventional may require a new appraisal and can delay closing. If you switch before the appraisal, the process is simpler. The earlier you decide, the less it costs. Talk to your loan officer before you order the appraisal.
Does FHA always have a lower interest rate than conventional?
Not always. FHA rates are often slightly lower on the note, but the combination of upfront MIP and ongoing annual MIP can make the total cost higher than a conventional loan with PMI, especially for borrowers with strong credit. Rate alone does not tell you the cost. Compare the monthly payment including mortgage insurance.
Is it true that sellers do not like FHA offers in St. Louis?
Some sellers and listing agents prefer conventional offers because FHA appraisal conditions can require repairs. In a competitive multiple-offer situation, an FHA offer with an appraisal contingency may lose to a conventional offer with fewer conditions. That does not mean FHA offers never win. It means you should discuss the competitive landscape with your agent and loan officer before submitting.
Can I use a Missouri first-time buyer program with either loan type?
Missouri Housing Development Commission (MHDC) programs can pair with both FHA and conventional loans depending on the specific program and your qualifications. Some down payment assistance programs are only available with FHA. Others work with conventional. Sean Zalmanoff can tell you which combinations apply to your purchase price and income in St. Louis.
What if my credit score is right on the line between programs?
A 660 score might qualify for both programs but pay very differently on each. Run both estimates. A few points of credit improvement before closing can also shift the math. Better Rate Mortgage reviews the score with you and identifies whether a rapid rescore or a short wait would change the best-fit program.
Sean Zalmanoff, NMLS #239823. Better Rate Mortgage, Company NMLS #2401335. Missouri, Illinois, Colorado. This article is educational and is not a commitment to lend. Equal Housing Lender.
