FHA vs. VA vs. Conventional Loans: Which Mortgage Is Best for El Paso Buyers?
Choosing the right mortgage is one of the most important financial decisions you'll make as an El Paso homebuyer. With median home prices around $251,000 and strong military presence at Fort Bliss, El Paso buyers have unique opportunities—and unique questions—when it comes to FHA, VA, and conventional loans.
This guide breaks down each loan type with El Paso-specific considerations, current rate ranges, and clear guidance on which mortgage fits your situation.
Quick Answer: Which Mortgage Is Best for El Paso Buyers?
For military and veterans near Fort Bliss: VA loans are almost always your best option—0% down, no PMI, and competitive rates.
For first-time buyers with lower credit scores (580-619): FHA loans offer the most accessible path to homeownership with just 3.5% down.
For buyers with 20% down and credit scores above 700: Conventional loans save you money by avoiding PMI entirely.
For buyers with 3-19% down and credit above 620: Compare conventional vs. FHA—conventional often wins if your credit score is 680+.
FHA vs. VA vs. Conventional Loans: Complete Comparison
| Feature | FHA Loan | VA Loan | Conventional Loan |
|---|---|---|---|
| Minimum Down Payment | 3.5% ($8,785 on $251K home) | 0% ($0 down) | 3% first-time / 5% standard |
| Minimum Credit Score | 580 (3.5% down) or 500 (10% down) | No official minimum (most lenders: 580-620) | 620 minimum |
| Private Mortgage Insurance | Required (entire loan life) | None required | Required under 20% down (removable) |
| Mortgage Insurance Cost | 0.55% annually + 1.75% upfront | None (2.15% funding fee, can be financed) | 0.2%-1.5% annually (varies by credit/down payment) |
| Loan Limits (El Paso 2026) | $524,225 | No limit for qualified borrowers | $766,550 (conforming) |
| Property Requirements | Must meet FHA standards | Must meet VA appraisal standards | Standard appraisal |
| Best For | Lower credit, limited savings | Military/veterans | Strong credit, 20%+ down |
What Credit Score Do I Need for a Mortgage in El Paso?
Credit score requirements vary significantly by loan type, and your score directly affects your interest rate and monthly payment.
FHA Loan Credit Requirements
- 580+ credit score: Qualify with 3.5% down payment
- 500-579 credit score: Qualify with 10% down payment
- Below 500: Generally not eligible for FHA financing
El Paso reality: About 62% of Texas first-time buyers use FHA loans, largely because of these flexible credit requirements. If your score is between 580-619, FHA is often your only realistic option.
VA Loan Credit Requirements
- No official VA minimum: The VA doesn't set a minimum credit score
- Lender requirements: Most El Paso lenders require 580-620
- Best rates: Scores above 660 typically get the most competitive rates
Fort Bliss advantage: Local lenders near Fort Bliss understand military credit situations, including deployment-related credit issues. They're often more flexible than lenders in other markets.
Conventional Loan Credit Requirements
- 620 minimum: Required by Fannie Mae and Freddie Mac
- 680+ preferred: Better rates and lower PMI costs
- 740+ excellent: Best available rates and terms
The credit score sweet spot: If your score is 680+, run the numbers on both FHA and conventional. Conventional often costs less over time due to removable PMI.
Down Payment Comparison: Real El Paso Numbers
Based on El Paso's median home price of $251,000, here's what each loan type requires:
| Loan Type | Down Payment % | Down Payment Amount | Loan Amount |
|---|---|---|---|
| VA Loan | 0% | $0 | $251,000 |
| FHA Loan | 3.5% | $8,785 | $242,215 |
| Conventional (First-Time) | 3% | $7,530 | $243,470 |
| Conventional (Standard) | 5% | $12,550 | $238,450 |
| Conventional (No PMI) | 20% | $50,200 | $200,800 |
Important: These amounts don't include closing costs, which typically run 2-5% additional ($5,000-$12,500 in El Paso).
PMI and Mortgage Insurance: The Hidden Cost That Changes Everything
Private mortgage insurance (PMI) protects the lender if you default—and it can add hundreds to your monthly payment. Understanding PMI is crucial for choosing the right loan.
FHA Mortgage Insurance Premium (MIP)
FHA loans require two types of mortgage insurance:
Upfront MIP: 1.75% of loan amount (can be financed into loan)
- On a $242,215 loan: $4,239 added to your balance
Annual MIP: 0.55% of loan amount, paid monthly
- On a $242,215 loan: $111/month
The catch: FHA mortgage insurance never goes away unless you refinance to a conventional loan. Even after you have 20% equity, you're still paying.
VA Funding Fee (Not PMI)
VA loans don't have PMI, but they do have a one-time funding fee:
First-time use, 0% down: 2.15% of loan amount
- On a $251,000 loan: $5,397 (can be financed)
Second-time use, 0% down: 3.3% of loan amount
Exemptions: Veterans with service-connected disabilities are exempt from the funding fee, making VA loans even more advantageous.
Conventional PMI
Conventional PMI varies based on credit score, down payment, and lender:
| Credit Score | 5% Down PMI | 10% Down PMI | 15% Down PMI |
|---|---|---|---|
| 620-639 | 1.5% ($314/mo) | 1.1% ($230/mo) | 0.8% ($167/mo) |
| 640-679 | 1.1% ($230/mo) | 0.8% ($167/mo) | 0.5% ($104/mo) |
| 680-719 | 0.7% ($146/mo) | 0.5% ($104/mo) | 0.3% ($63/mo) |
| 720+ | 0.4% ($84/mo) | 0.3% ($63/mo) | 0.2% ($42/mo) |
Based on $251,000 home price, estimates only
The key advantage: Conventional PMI automatically cancels when you reach 20% equity. You can also request cancellation at 20% equity or when your home value increases.
Current Mortgage Rate Ranges (January 2026)
Interest rates fluctuate daily, but here are typical rate ranges for El Paso buyers with good credit:
| Loan Type | Rate Range | Notes |
|---|---|---|
| 30-Year FHA | 6.25% - 7.00% | Rates similar to conventional |
| 30-Year VA | 5.75% - 6.50% | Typically 0.25-0.5% lower than conventional |
| 30-Year Conventional | 6.00% - 7.00% | Best rates for 740+ credit |
| 15-Year Conventional | 5.25% - 6.25% | Lower rate, higher payment |
Rate lock tip: Once you find a home and go under contract, lock your rate immediately. Rates can change significantly in the 30-45 days before closing.
Monthly Payment Comparison: $251,000 El Paso Home
Let's compare real monthly payments for each loan type on a median-priced El Paso home:
| Cost Component | FHA (3.5% down) | VA (0% down) | Conv. (5% down) | Conv. (20% down) |
|---|---|---|---|---|
| Loan Amount | $242,215 | $256,397* | $238,450 | $200,800 |
| Principal & Interest | $1,600 | $1,645 | $1,575 | $1,327 |
| Property Tax | $437 | $437 | $437 | $437 |
| Homeowner's Insurance | $100 | $100 | $100 | $100 |
| PMI/MIP | $111 | $0 | $167** | $0 |
| Total Monthly | $2,248 | $2,182 | $2,279 | $1,864 |
*VA loan includes financed funding fee **Based on 680 credit score; varies significantly
The VA advantage is clear: No PMI saves Fort Bliss families $1,332+ annually compared to FHA—and that savings lasts the life of the loan.
FHA Loans in El Paso: Best for First-Time Buyers with Limited Savings
When FHA Makes Sense
FHA loans are your best option when:
- Your credit score is 580-619: Conventional loans aren't available or have very high PMI
- You have minimal savings: 3.5% down is achievable with El Paso assistance programs
- You've had past credit issues: FHA is more forgiving of bankruptcy (2+ years ago) or foreclosure (3+ years ago)
- Your debt-to-income ratio is higher: FHA allows up to 50% DTI in some cases
El Paso FHA Considerations
Loan limits: El Paso's 2026 FHA loan limit is $524,225—more than enough for any home in the local market.
Property standards: FHA requires the home meet minimum property standards. In El Paso, this sometimes means older homes need repairs before closing. Your agent should help you identify potential FHA issues during showings.
Appraisal requirements: FHA appraisals are slightly more stringent than conventional. Items like peeling paint, missing handrails, or water heater issues must be addressed.
FHA + Down Payment Assistance
El Paso's assistance programs often work best with FHA loans:
- City of El Paso Priority Housing: Up to $45,000 in forgivable assistance
- TSAHC grants: $10,000-$15,000 for first-time buyers
- El Paso Housing Finance Corporation: 4% of loan amount
Combined with FHA's 3.5% down requirement, many El Paso buyers can purchase with $0-$2,000 out of pocket.
VA Loans Near Fort Bliss: The Clear Winner for Military Families
Why VA Loans Are Almost Always Best
For eligible service members, veterans, and surviving spouses, VA loans offer unmatched advantages:
$0 down payment: Buy a $300,000 home with no money down (beyond closing costs)
No PMI—ever: Save $100-$300 monthly compared to FHA or conventional
Lower interest rates: VA rates are typically 0.25-0.5% below conventional rates
No loan limits: Qualified borrowers with full entitlement can borrow above conforming limits
Easier qualification: More flexible debt-to-income requirements than conventional
VA Loan Eligibility
You may be eligible for VA benefits if you are:
- Active-duty service member with 90+ continuous days of service
- Veteran with 90+ days during wartime or 181+ days during peacetime
- National Guard/Reserve member with 6+ years of service
- Surviving spouse of service member who died in service or from service-connected disability
Fort Bliss-Specific Advantages
Local lender expertise: El Paso lenders process thousands of VA loans annually. They understand military income (BAH, BAS, flight pay) and can work with deployment schedules.
VA appraisers familiar with El Paso: Local VA appraisers know the market, reducing appraisal issues.
Short commute options: Neighborhoods like Castner Heights and Northeast El Paso offer homes under $250,000 within 10-15 minutes of Fort Bliss.
The VA Funding Fee: Still Worth It
Even with the 2.15% funding fee, VA loans almost always cost less than FHA or conventional loans over time:
| Scenario | VA Total Cost (5 years) | FHA Total Cost (5 years) | VA Savings |
|---|---|---|---|
| $251K home, 0% vs 3.5% down | $136,317 | $143,725 | $7,408 |
Includes all payments, PMI/MIP, and funding fee/upfront MIP
Conventional Loans: Best for 20% Down or Excellent Credit
When Conventional Wins
Conventional loans are your best choice when:
- You have 20% down: Avoid PMI entirely and get the lowest monthly payment
- Your credit score is 720+: You'll get excellent rates and minimal PMI
- You plan to stay 5+ years and have 680+ credit: PMI cancellation makes conventional cheaper long-term than FHA
- You're buying a condo: Some condo complexes aren't FHA-approved
The 680 Credit Score Decision Point
If your credit score is 680+, conventional loans often beat FHA—even with less than 20% down:
FHA with 680 credit: $111/month PMI for life of loan Conventional with 680 credit: $146/month PMI until you reach 20% equity
If you reach 20% equity in 7 years, conventional saves you 23+ years of PMI payments.
Conventional Loan Types
Conforming loans: Up to $766,550 in El Paso (2026 limit). Best rates and terms.
Jumbo loans: Above conforming limit. Higher rates and stricter requirements. Rarely needed in El Paso's market.
First-time buyer programs: 3% down options through Fannie Mae HomeReady and Freddie Mac Home Possible. Income limits apply.
Which Loan Should You Choose? Decision Guide
Choose FHA If:
- Credit score is 580-619
- You have less than 5% saved for down payment
- You've had bankruptcy or foreclosure in the past 2-3 years
- You don't qualify for VA benefits
- You plan to refinance within 3-5 years anyway
Choose VA If:
- You have any VA eligibility (active-duty, veteran, guard/reserve, surviving spouse)
- You want the lowest possible monthly payment
- You have limited savings for down payment
- You want to avoid PMI entirely
- You're PCSing to Fort Bliss and need to buy quickly
Choose Conventional If:
- You have 20% down payment saved
- Your credit score is 720+ and you have less than 20% down
- Your credit score is 680+ and you plan to stay 5+ years
- You're buying a non-FHA-approved condo
- You want the option to cancel PMI as you build equity
Frequently Asked Questions
What credit score do I need for a mortgage in El Paso?
The minimum credit score depends on your loan type: FHA requires 580 for 3.5% down (or 500 for 10% down), VA has no official minimum but most lenders want 580-620, and conventional requires 620 minimum. For the best rates on any loan type, aim for 680+. If your score is below 580, focus on credit improvement for 3-6 months before applying.
Can I use a VA loan if I already used my benefit?
Yes, VA loan entitlement can be restored and reused. If you paid off your previous VA loan or sold the home, your full entitlement is typically restored. Even with a current VA loan, you may have remaining entitlement for a second home. Fort Bliss families often use VA loans for each PCS move.
Is FHA or conventional better for first-time buyers in El Paso?
It depends on your credit score and down payment. FHA is better if your credit score is below 680 or you have less than 5% down. Conventional is often better if your credit score is 680+ because PMI is lower and can be removed. Run the numbers with a lender to compare total costs over your expected ownership period.
How much house can I afford in El Paso with an FHA loan?
With FHA's maximum 43-50% debt-to-income ratio, a household earning $65,000 annually can typically afford a home around $230,000-$260,000. The exact amount depends on your other debts, interest rate, property taxes, and insurance costs. Get pre-approved to know your specific number.
Do VA loans take longer to close in El Paso?
Not significantly. While VA loans require a VA appraisal (which can add a few days), El Paso has many VA-experienced appraisers and lenders. Most VA loans close in 30-45 days, similar to FHA and conventional. The key is working with a lender who processes VA loans regularly.
Can I put 0% down on a conventional loan?
No, conventional loans require at least 3% down for first-time buyers or 5% for repeat buyers. The only true 0% down options are VA loans (for eligible military) and USDA loans (for eligible rural properties and income-qualified buyers). Some down payment assistance programs can cover your conventional down payment, effectively making it 0% out of pocket.
Ready to Get Pre-Approved for Your El Paso Mortgage?
As a local El Paso real estate expert specializing in first-time buyers and military families, I work with lenders who understand every loan type—and who know how to get you the best deal.
I help you:
- ✅ Compare FHA, VA, and conventional options for your specific situation
- ✅ Connect with lenders who offer the most competitive El Paso rates
- ✅ Navigate down payment assistance programs that reduce your out-of-pocket costs
- ✅ Find homes that meet FHA and VA property requirements
- ✅ Close on time, even with complex financing
Fort Bliss families: I understand BAH, PCS timelines, and VA loan nuances. Let me help you make your move stress-free.
Get Your Personalized Mortgage Comparison
Every buyer's situation is different. I'll connect you with trusted lenders who will run the numbers for FHA, VA, and conventional—so you can see exactly which option saves you the most money.
Call or Text: (915) 240-8340 Email: info@marina-ramirez.com Schedule Consultation: Book Your Free Buyer Consultation
Questions about loan types or your specific situation? Text me and I'll point you in the right direction—no obligation, just honest guidance.
About Marina Ramirez: Marina Ramirez is an El Paso-based REALTOR® specializing in first-time buyers, military families, and investors. With expertise in FHA, VA, and conventional financing options, Marina helps buyers navigate the mortgage process with confidence. Sí Hablo Español.
Last Updated: January 2026 | Information based on current lending guidelines, El Paso market conditions, and 2026 loan limits. Interest rates and programs change frequently—consult with a licensed mortgage professional for current rates and personalized advice.