Why most Philly buyers with good credit end up here
A conventional loan is one Fannie Mae or Freddie Mac will buy, which means it follows their rulebook instead of HUD’s. Three things make it the default around here for buyers with a 680 or better score. The mortgage insurance can be cancelled. The appraiser is judging value and safety, and tends to be less exacting about a scuffed porch rail than an FHA appraiser on the same South Philly block. And the 2026 loan limit runs about $200,000 higher than FHA’s.
The trade is credit. Conventional pricing is built on your score, and the best pricing sits at 780 and up. A 640 score can still get a conventional loan, but the lender will probably show you an FHA payment that’s lower.
3% down and the income rule
Fannie’s HomeReady and Freddie’s Home Possible allow 3% down on a one-unit primary residence if your income is at or under 80% of the area median income for the property’s address. The lender runs the address through the agency lookup tool. The 2026 figures took effect in June, and we won’t print a dollar amount here because it depends on the exact location and moves every year. Ask the lender to run it before you assume.
Above that income, the lender will tell you whether a 3% option applies or the minimum is 5%. Two other things worth knowing. First-time buyers at or under 100% of area median income get the agencies’ risk-based pricing adjustments waived, which can matter over the life of the loan. And HomeReady buyers at or under 50% of area median income can get a $2,500 credit toward closing on loans through February 1, 2027, so ask whether it’s still funded.
The 2026 conforming limits
FHFA raised the baseline for 2026, and every county in the Philadelphia area sits at baseline. None is designated high-cost.
| Units | 2026 conforming limit |
|---|---|
| 1 | $832,750 |
| 2 | $1,066,250 |
| 3 | $1,288,800 |
| 4 | $1,601,750 |
Anything above the one-unit figure is a jumbo loan, which is where a lot of the Main Line and Society Hill lives. Owner-occupied two- to four-unit buildings allow 5% down under both agencies’ rules, subject to lender approval, and $1,066,250 covers nearly every Fishtown duplex on the market. See duplex and triplex loans.
PMI, and how it leaves
Private mortgage insurance is on a conventional loan whenever you put down less than 20%. The premium depends on your score and the down payment, and PMI on a 760 score costs a good deal less than on a 640. Under federal law you can ask the servicer to cancel it once the balance reaches 80% of the original value, if you’re current, have a good payment history, and have no second liens. The servicer has to drop it automatically at 78% on the original amortization schedule, and at the loan’s midpoint regardless.
On a $300,000 rowhome with 3% down, the loan starts at $291,000 and you can request cancellation once it’s paid to $240,000. Philadelphia prices have moved since 2020, and a new appraisal showing higher value can get you to 80% sooner, subject to the servicer’s rules on seasoning and evidence of value.
FHA or conventional on a $300,000 rowhome
| Conventional | FHA | |
|---|---|---|
| Minimum down | 3% ($9,000) under the income limit | 3.5% ($10,500) at a 580 score |
| Credit floor | 620 | 580, or 500 with 10% down |
| Mortgage insurance | Cancellable at 80% | Life of the loan at 3.5% down |
| 2026 limit, 1 unit | $832,750 | $630,200 |
| Appraisal standard | Value and safety | HUD minimum property standards |
The rough rule: a score of 700 or better with 5% down and conventional usually wins on total cost. Under 660 and FHA usually wins on the monthly payment. In between, it depends on the exact score and the house, which is why the lender should quote both. Read the FHA page for the other side.
PHFA on a conventional loan
PHFA’s Keystone Home Loan can be a conventional first mortgage at 3% to 5% down with PHFA’s own insurance, for first-time buyers with a 660 score under the program’s limits. In 2026 that’s a purchase price up to $730,600 in Philadelphia and $588,800 in the four suburban counties, with income caps of $147,200 in the city and $122,700 in the suburbs for a one- or two-person household. Attach K-FIT, 5% of the price forgiven over ten years, and the down payment is covered. Details in the PHFA guide.
On the same $300,000 rowhome, 3% down is $9,000 and your half of Philadelphia’s 4.578% transfer tax is $6,867. The down payment gets all the attention. The tax is nearly as big, and it can’t be financed.
Start with one call
Say your score, your down payment, and the price range. The lender you get prices conventional against FHA for Philadelphia rowhomes and Delco twins, with the transfer tax already in the estimate. Call us.