What is the current mortgage rate for a 30-year fixed loan?

As of February 26, 2026, the average 30-year fixed mortgage rate is 5.98%, according to Freddie Mac's weekly Primary Mortgage Market Survey — the first reading below 6% since mid-2022.

Will mortgage rates continue to drop in 2026?

Economists and housing analysts have mixed outlooks. The NAHB projects an average of around 6.17% for 2026, suggesting rates may tick back up slightly from current lows. However, a softening economy or additional Federal Reserve rate adjustments could push rates lower. The safest approach is to act when rates align with your personal financial goals rather than trying to time the market perfectly.

What credit score do I need to get the best mortgage rate?

Generally, borrowers with credit scores of 740 or higher qualify for the most competitive mortgage rates. Scores between 700-739 still qualify for good rates, though slightly higher. An Azalea Mortgage loan officer can review your credit profile and help identify strategies to maximize your rate eligibility.

How much does a 1% mortgage rate change affect my monthly payment?

On a $300,000 loan, each 1% change in interest rate affects your monthly payment by approximately $170-$180. On a $400,000 loan, that figure rises to approximately $230-$240 per month — or roughly $2,800 per year.

Can I get a mortgage in Tyler, TX with a low down payment?

Yes. Several loan programs offer low or no down payment options, including FHA loans (3.5% down), VA loans (0% down for qualifying veterans and service members), USDA loans (0% down for eligible rural and suburban properties), and conventional loans (as low as 3% down for first-time buyers). Azalea Mortgage specializes in helping Tyler-area buyers navigate all of these programs.

FHA vs. Conventional Loans: Which Is Best in Tyler, TX?

Ben Burks

Aug 26

5 min read

If you are shopping for a home in Tyler, TX right now, you have heard two loan names more than any others: FHA and conventional. Both can get you into a house. Both carry very different price tags depending on your credit score, your savings, and how long you plan to stay put.

Neither one is universally cheaper. At Azalea Mortgage, we run this comparison for Tyler and Smith County buyers every week. Below is the same side-by-side we walk clients through, using current 2026 numbers and a real Tyler price point.

The Short Answer: Who Wins Each Matchup

Here is the rule of thumb we use before opening anyone's file:

FHA usually wins under about 680, with collections or a recent credit hiccup, or with a high debt-to-income ratio.
Conventional usually wins at 700 or higher with at least 5 percent down, because you can cancel mortgage insurance later.
It is close to a tie from 660 to 700, where the math below matters most.

FHA is friendlier to lower credit scores because the loan is insured by the federal government. Conventional loans are not, so pricing leans much harder on your score.

Down Payment and Credit Score Requirements

FHA sets a floor of 580 credit for 3.5 percent down. Between 500 and 579, HUD still allows the loan but requires 10 percent down. Most FHA lenders add their own overlays and look for something closer to 620 in practice, so shop around if you are near the minimum.

Conventional loans generally start at a 620 credit score. Down payments start at 3 percent through HomeReady and Home Possible, but both cap income at 80 percent of Smith County's area median income. Earn above that cap and your conventional minimum is 5 percent down.

So conventional can technically go lower on down payment. But FHA's 3.5 percent reaches far more buyers, because no income ceiling is attached to it. You can see the full program details on our FHA loans in Tyler, TX page.

Mortgage Insurance: The Real Deciding Factor

FHA mortgage insurance premium (MIP) has two parts in 2026: an upfront premium of 1.75 percent of the loan amount, normally rolled into the balance, plus an annual premium of about 0.55 percent for most 30-year loans with 3.5 percent down. The catch is duration. Put down less than 10 percent and MIP stays for the life of the loan. The only ways off are refinancing or selling.

Conventional private mortgage insurance (PMI) is priced by credit score and down payment, with no upfront premium. More importantly, it ends. You can request cancellation at 80 percent loan-to-value, and your servicer must drop it automatically at 78 percent.

For a buyer planning to stay in a Tyler home seven to ten years, that difference alone can outweigh the interest rate.

Running the Numbers on a $325,000 Tyler Home

Tyler's median home price sat near $325,000 in August 2026, with homes taking a median of 82 days to sell. Here is that house priced both ways, using an FHA 30-year average around 6.09 percent and the Freddie Mac conventional 30-year average of 6.65 percent for the week of August 20, 2026.

FHA, 3.5% down: $11,375 down. Base loan $313,625 plus $5,488 upfront MIP equals $319,113 financed. About $1,932 in principal and interest, plus roughly $144 of MIP, or about $2,076 per month.
Conventional, 5% down: $16,250 down. Loan of $308,750. About $1,982 in principal and interest, plus PMI that commonly runs $103 to $154 at this loan size, or roughly $2,085 to $2,136 per month.
Conventional, 20% down: $65,000 down. Loan of $260,000. About $1,669 in principal and interest, with no mortgage insurance at all.

Notice how close the first two are. FHA starts out $10 to $60 per month cheaper and asks for nearly $5,000 less at closing. But five years in, the conventional buyer can likely drop PMI permanently while the FHA buyer keeps paying MIP. That is the real trade.

These figures exclude Texas property taxes and homeowners insurance, and your actual PMI quote will differ. For local price and rate context, see our most recent Tyler housing market update.

Loan Limits and Property Condition in Smith County

Loan limits. For 2026, the FHA limit for a one-unit home in Smith County is $541,287, HUD's national floor. The conforming limit for a conventional loan in every Texas county is $832,750. Few Tyler buyers hit the FHA ceiling, but above roughly $560,000, conventional is your route.

Property standards. FHA appraisers evaluate value and minimum property condition. Peeling paint on a pre-1978 home, a failing roof, missing handrails, or dead HVAC can all require repairs before closing. Conventional appraisals are more forgiving. On older homes in Tyler's established neighborhoods, this sometimes decides the loan type for you.

Confirm your county limit on HUD's FHA mortgage limits lookup and the FHFA conforming loan limit map.

Frequently Asked Questions

Can I refinance from an FHA loan to a conventional loan to get rid of MIP?

Yes, and it is one of the most common reasons Tyler homeowners refinance. Once you have at least 20 percent equity and a credit score around 620 or better, refinancing into a conventional loan removes FHA mortgage insurance entirely. You pay standard closing costs, so the move makes sense when MIP savings recover those costs within two to three years.

Do sellers in Tyler, TX prefer conventional offers over FHA offers?

Some do, mainly because of FHA's property condition requirements rather than any doubt about the buyer. With Tyler homes averaging 82 days on the market in August 2026, that preference carries far less weight than it did in 2021. A strong local pre-approval and a clean closing timeline matter more to most sellers than the three letters on your loan.

Is the FHA interest rate really lower than the conventional rate?

Usually yes on the note rate, but that is not the whole cost. In late August 2026, 30-year FHA averages ran near 6.09 percent against a Freddie Mac conventional average of 6.65 percent. FHA mortgage insurance often erases that advantage over time, so compare APR and total five-year cost rather than note rates.

What credit score do I need for the best conventional rate in 2026?

Conventional pricing improves in tiers, and the best pricing generally starts at 740. Below about 680, rate and PMI adjustments get steep enough that FHA frequently becomes cheaper. That crossover is why Azalea Mortgage quotes both programs side by side for every client.

Can I use an FHA loan for a duplex or fourplex in Tyler?

Yes, as long as you live in one of the units as your primary residence. Smith County FHA limits rise with unit count in 2026: $693,050 for two units, $837,700 for three, and $1,041,125 for four. That makes FHA one of the most accessible paths into owner-occupied small multifamily in East Texas.

Still Not Sure Which Loan Fits?

If you served in the military, a third option beats both of these in most scenarios. Our guide to VA home loans in Tyler, TX covers zero-down eligibility, the funding fee, and how VA compares on monthly cost.

Have questions about FHA loans? The Azalea Mortgage team is here to help Tyler, TX homebuyers navigate every step of the financing process. Reach out today for a free consultation.