Most Colorado home buyers face this decision at some point in the process: FHA or conventional? The right answer depends on your credit score, down payment, the property you're buying, and sometimes the specific county you're buying in — because Colorado has counties (Eagle, Garfield, Routt, Lake, Summit, San Miguel) with conforming loan limits significantly above the national baseline. There's no universal answer, and anyone who tells you one program is always better than the other isn't doing their job.
Here's how the two programs actually compare, grounded in what we see in Colorado transactions every week.
The Core Differences
FHA loans are insured by the Federal Housing Administration and designed for buyers who need flexibility — lower down payments, more accommodating credit standards, and more forgiving debt-to-income ratios. The tradeoff is mortgage insurance: FHA charges an upfront mortgage insurance premium (1.75% of the loan amount, typically rolled into the loan) plus an annual MIP (roughly 0.55% of the loan balance for most 30-year loans) that runs for the life of the loan if you put less than 10% down. On a $500,000 loan, that's roughly $230/month in MIP that doesn't go away until you refinance or sell.
Conventional loans follow Fannie Mae and Freddie Mac guidelines. Credit standards are higher — most lenders want 620+ FICO for conventional approval, and you'll get meaningfully better pricing at 740+. Down payments start at 3% for first-time buyers (HomeReady, Home Possible programs) or 5% for repeat buyers. Private mortgage insurance (PMI) is required if you put less than 20% down, but unlike FHA's MIP, PMI cancels automatically once you reach 20% equity — and at current appreciation rates in Colorado mountain markets, that can happen faster than many buyers expect. At 80% LTV or below, PMI disappears entirely.
When FHA Wins
FHA is typically the right call when your FICO score is below 680 — the pricing differential on conventional becomes significant enough below that threshold that FHA's fixed MIP is often cheaper. FHA is also better for buyers with higher debt-to-income ratios (above 45%) that conventional underwriting would reject. And for buyers in Colorado's rural markets buying older homes — Paonia, Hotchkiss, Leadville, Silverton — FHA's property condition requirements are actually more relevant because the appraiser enforces basic habitability standards. That protects buyers from inadvertently purchasing a property with serious deferred maintenance.
When Conventional Wins
If your credit score is 680 or above and you have at least 5% down, conventional almost always produces a lower total monthly payment when you factor in the MIP differential. At 740+ FICO, the conventional pricing advantage is substantial. Conventional is also better for condos in projects that aren't FHA-approved, for investment properties (FHA is primary-residence only), and for Colorado's higher-priced mountain markets where the property's condition makes FHA appraisal complications more likely.
2026 Colorado Loan Limits (single-unit)
| County | FHA Limit | Conventional Limit |
|---|---|---|
| Eagle (Vail, Avon) | $1,249,125 | $1,249,125 |
| Garfield (Glenwood, Rifle) | $1,209,750 | $1,209,750 |
| Pitkin (Aspen) | $1,209,750 | $1,209,750 |
| Routt (Steamboat) | $1,089,050 | $1,089,050 |
| Summit (Breckenridge) | $1,092,500 | $1,092,500 |
| Lake (Leadville) | $1,092,500 | $1,092,500 |
| San Miguel (Telluride) | $994,750 | $994,750 |
| Grand (Granby) | $883,200 | $883,200 |
| Most other CO counties | $832,750 | $832,750 |
Frequently Asked Questions
I have a 650 credit score and 5% down. Which is better?
At 650 FICO, FHA almost certainly produces better pricing than conventional. Conventional PMI rates at 650 are expensive and the interest rate will be higher. FHA's fixed MIP structure is more predictable and often cheaper at that credit profile. That said, we run the numbers both ways for every buyer before recommending — sometimes the difference is smaller than expected.
Can I use FHA to buy a vacation rental or investment property?
No. FHA requires the property to be your primary residence. For investment properties and vacation rentals, conventional or DSCR financing applies.
I'm buying in Glenwood Springs where the conforming limit is $1,209,750. Does FHA work up to that amount?
Yes — FHA loan limits match the conforming limits by county. In Garfield County, FHA financing is available up to $1,209,750. Most Glenwood Springs transactions fall well under that ceiling.
My property has some deferred maintenance. Does that affect which loan I use?
Potentially yes. FHA has Minimum Property Standards — appraisers are required to flag health and safety issues including peeling paint (on pre-1978 homes), broken windows, missing handrails, and non-functional systems. If the seller won't repair the issues before closing, FHA may not work for that property. Conventional appraisers flag issues that affect market value but aren't required to flag basic habitability items the same way. This is a real consideration in Colorado's older mountain town housing stock.