FHA vs Conventional Loans in 2026: Which Wins in Queens?

2026 loan limits: Queens is a high-cost area

Both loan types got bigger for 2026, and Queens sits at the top of the scale. The FHA ceiling for a one-unit home in Queens — part of HUD's high-cost New York City metro area — is $1,249,125 for 2026, up from $1,209,750 in 2025. Two-unit properties go to $1,599,375, three-unit to $1,933,200, and four-unit to $2,402,625. The floor in low-cost areas is $541,287, which tells you how much of a premium HUD assigns to this market.

Conventional conforming loans follow the FHFA limits: the 2026 baseline is $832,750 for most of the country, and high-cost areas like Queens get 150% of baseline — which lands at the same $1,249,125 ceiling for a one-unit property. So on loan size alone, neither program has an edge in Queens; both will finance up to about $1.25 million on a single-family home or condo.

Remember the limit applies to the loan amount, not the purchase price. With 3.5% down, the $1,249,125 FHA ceiling covers purchases up to roughly $1.29 million. Anything above that needs a jumbo loan, which is a different conversation with stricter rules across the board.

FHA: 3.5% down, but the insurance never leaves

The FHA pitch is simple: 3.5% down with a credit score of 580 or higher (scores of 500 to 579 can qualify with 10% down). On a $600,000 Queens condo, that is $21,000 down instead of $120,000.

The price of that accessibility is mortgage insurance premium — MIP — in two parts. The upfront MIP is 1.75% of the loan amount, usually rolled into the balance (about $10,100 on a $579,000 loan). The annual MIP is 0.55% for most 30-year borrowers putting less than 10% down, billed monthly — roughly $265 a month on that same loan in the early years.

Here is the part that matters most: if you put down less than 10%, the annual MIP lasts for the life of the loan. It does not cancel at 20% equity, no matter how much your home appreciates. Put down 10% or more and it drops off after 11 years. For most FHA buyers — the 3.5%-down crowd — the only exit from MIP is refinancing into a conventional loan once you have 20% equity and the credit to qualify.

Conventional: 3-5% down, and PMI actually ends

Conventional loans start at 3% down for first-time buyers through programs like HomeReady and Home Possible, with 5% the more common minimum. The headline minimum credit score is 620 — set by Fannie Mae and Freddie Mac, not by law — though individual lenders often add their own overlays and require 20 to 40 points above the published minimum.

With less than 20% down you pay private mortgage insurance (PMI), but PMI works very differently from FHA's MIP. PMI rates run roughly 0.5% to 2.25% of the loan per year depending on your credit score and down payment — good credit pays dramatically less. And crucially, PMI cancels: by law it drops off automatically at 78% loan-to-value, and you can request cancellation at 80%.

Do the long math on a $600,000 purchase. FHA at 3.5% down: $10,100 upfront MIP plus about $265 a month in annual MIP, every month, for 30 years unless you refinance — roughly $49,000-plus in annual MIP alone over the life of the loan. Conventional at 5% down with decent credit: PMI in the neighborhood of $150 to $200 a month, gone in five to nine years as you pay down and the home appreciates. The FHA loan often has a slightly lower interest rate, but the permanent insurance usually swamps that advantage over time.

Credit scores: the real dividing line

FHA's minimums are the most forgiving in mainstream lending: 580 for 3.5% down, 500 with 10% down. The annual MIP rate does not change with your score — a 580 borrower pays the same 0.55% as a 720 borrower. If your credit is bruised, FHA's flat pricing is genuinely kinder than conventional's tiered pricing.

Conventional's floor is 620, but the floor is not the price that matters. PMI is priced by credit tier, so a 620 borrower can pay two to four times the PMI rate of a 760 borrower on the same loan. The practical break-even most lenders talk about: below roughly 680, FHA's flat MIP often beats conventional's expensive PMI; above 680 to 700, conventional usually wins on total cost.

One honest note: program minimums are not lender minimums. Many banks impose overlays — requiring, say, 600 or 620 for FHA when HUD allows 580. If one lender turns you down at your score, another may approve you. Shop, especially at the margins.

The Queens wrinkle: condos and co-ops

This is where Queens buyers get surprised. FHA will only insure a condo loan if the condo project is on HUD's approved condo list. Plenty of Queens condo buildings are approved — but plenty are not, and getting a building approved is the HOA's project, not yours. Before you write an FHA offer on a condo, check the building's approval status. No approval, no FHA loan, no matter how qualified you are.

Co-ops are worse for FHA: the vast majority of New York co-ops are not FHA-eligible. If you are buying a co-op in Jackson Heights, Forest Hills, or anywhere else in Queens, plan on conventional financing. This single fact decides the FHA-vs-conventional question for a huge share of Queens apartment buyers before any math is even done.

FHA also requires the property to meet its minimum property standards — stricter appraisal requirements around peeling paint, handrails, roof condition, and the like. A fixer-upper that a conventional lender would finance without blinking can get flagged on an FHA appraisal. If the home needs work, conventional is usually the smoother path.

Debt-to-income and the rest of the fine print

FHA allows higher debt-to-income ratios: up to about 57% back-end with automated underwriting approval, versus roughly 43% for manual underwriting. Conventional caps are stricter — typically 45%, stretching to 50% with strong compensating factors and automated approval. If your income is solid but your monthly debts are heavy, FHA's flexibility can be the difference between approved and denied.

FHA also allows seller concessions up to 6% of the price, versus 3% to 6% on conventional depending on down payment — meaningful when you need the seller to cover closing costs or buy down your rate. Gift funds for the down payment are allowed under both programs, with documentation rules that vary.

Two hard FHA limits to know: the home must be your primary residence — no investment properties, no second homes — and there is a seasoning clock on past credit events (two years after a Chapter 7 bankruptcy discharge versus four for conventional; three years after foreclosure versus seven). If your credit history has a rough chapter in the recent past, FHA's shorter waiting periods can reopen the door years earlier.

Side-by-side: FHA vs conventional in 2026

Minimum down payment: FHA 3.5% (580+ score) or 10% (500-579 score); conventional 3% (first-time buyer programs) or 5% standard. Minimum credit score: FHA 580 for 3.5% down; conventional 620, with better pricing above 680. 2026 Queens one-unit loan limit: $1,249,125 for both.

Mortgage insurance: FHA charges 1.75% upfront plus 0.55% annual (most 30-year borrowers), lasting the life of the loan if you put down less than 10%; conventional PMI runs 0.5% to 2.25% by credit tier and cancels automatically at 78% loan-to-value (requestable at 80%). DTI ceiling: FHA up to ~57% with automated approval; conventional ~45-50%. Seller concessions: FHA up to 6%; conventional 3-6%.

Property rules: FHA requires primary residence only, HUD-approved condo projects, and stricter appraisal standards; conventional covers primary, second, and investment properties with standard appraisals. Co-ops in Queens are effectively conventional-only.

Who should pick which

Pick FHA if your credit score is under about 680, your down payment savings are thin, your debt-to-income ratio needs the extra room, or a past bankruptcy or foreclosure is still inside conventional's longer waiting periods.

Pick conventional if your score is 680 or higher, you can put down 5% or more, you are buying a co-op or a non-HUD-approved condo, the property needs work, or you plan to stay long enough that killing PMI in a few years beats paying MIP forever. If you are on the fence with decent credit, run both scenarios over five and ten years — the crossover point where conventional pulls ahead is usually earlier than buyers expect.