Trying to decide between FHA and conventional for a Falmouth home? With many listings pushing into higher price ranges, the loan you choose can determine what you can buy and what you will pay each month. You want a clear path that fits your credit, down payment, and the realities of Cape Cod properties. In this guide, you will learn when FHA fits, when conventional is smarter, and how local factors like loan limits, condos, flood zones, and taxes affect the decision. Let’s dive in.
Quick answer for Cape Cod buyers
If you need flexible credit and a small down payment, FHA can help as long as the home’s price keeps the loan under Barnstable County’s FHA limit. In early 2025, many Cape Cod homes list around 949,000, which means a large share of properties will exceed FHA’s local cap. For these homes, conventional or jumbo financing is often the practical route. Always confirm current county limits before you choose a loan type, since they update annually through FHFA’s 2025 conforming limits and HUD’s 2025 FHA limits update.
FHA vs. conventional: what changes your cost
Down payment and credit
- FHA allows a minimum 3.5 percent down payment with a qualifying credit profile, and it is often more forgiving on past credit issues. See HUD’s rules in the Single Family Housing Policy Handbook.
- Conventional options can go as low as 3 percent down for eligible borrowers through programs like Fannie Mae’s HomeReady, but they typically expect stronger credit. With less than 20 percent down, you will have PMI.
Mortgage insurance structure
- FHA charges an upfront mortgage insurance premium of about 1.75 percent of the base loan amount plus annual MIP that you pay monthly. Learn more on HUD’s mortgage insurance premium page.
- Conventional PMI is required with less than 20 percent down, but you can remove it. You can request cancellation at 80 percent loan to value, and servicers must terminate at 78 percent, subject to conditions. See the CFPB’s guidance on PMI removal.
Loan limits and purchase price reach
- The 2025 conforming loan limit baseline for one-unit properties is 806,500, per FHFA.
- FHA insures loans only up to county limits. For Barnstable County in 2025, the single-family FHA limit is below many typical Falmouth list prices. HUD’s 2025 update is here: HUD loan limits announcement.
Local factors on Cape Cod that can sway your choice
Flood zones and insurance
Coastal properties may require flood insurance if they fall in FEMA high-risk zones. Premiums can be significant and affect your total monthly cost. Ask your insurer for estimates early and verify the flood zone using the state’s FEMA National Flood Hazard Layer resource.
Condo approvals and project health
If you are buying a condo, financing often depends on the association’s status. FHA needs project approval or a single-unit approval. Conventional loans use their own project reviews. Check status early through HUD’s FHA condo lookup and have your lender confirm whether the project meets Fannie or Freddie requirements.
Property taxes and carrying costs
Property taxes are part of your escrow and monthly budget. Falmouth’s FY2025 tax rate is 5.87 per 1,000 of assessed value, per the town’s assessing page. Add this to insurance and HOA dues to compare FHA MIP versus conventional PMI realistically.
Second-home dynamics and competition
Cape Cod has a notable share of second or seasonal homes, which can influence inventory and competition. That can mean more cash or high-down-payment buyers in certain price tiers. See regional context from the Cape Cod Commission.
When FHA makes sense in Falmouth
- You need a low down payment and meet FHA’s credit standards, and the home price keeps your loan at or below the Barnstable County FHA limit.
- Your credit history or recent events make conventional approval tough, and FHA’s approach is more flexible for your profile.
- You plan to use gift funds or down payment assistance that work well with FHA and your lender confirms eligibility.
- You are buying a primary residence that fits FHA property rules, and the condo or project is FHA-approvable if applicable.
When conventional is the better path
- The home price is over the FHA county limit, which is common in mid to upper price points.
- You can put down 10 to 20 percent or more, want PMI that you can remove, and plan to build equity or refinance on a clear timeline.
- Your credit is solid and you want maximum flexibility, including options for second homes or condo projects that are not FHA approved.
Two quick Cape Cod scenarios to frame your choice
- Example 1: You target a 650,000 primary residence. You may be eligible for FHA with 3.5 percent down if you meet credit rules, or for a 3 percent down conventional program if you qualify. Compare total costs, including FHA’s upfront MIP and monthly MIP versus cancelable conventional PMI.
- Example 2: You target a 900,000 single-family home. The needed loan amount would likely exceed FHA’s Barnstable County limit, so you would compare conforming conventional versus jumbo options instead.
A simple step-by-step to choose confidently
- Verify today’s price against the current county limits for FHA and conforming. Start with FHFA’s 2025 conforming limits and HUD’s 2025 FHA update.
- Run a flood-zone check and get preliminary flood insurance quotes using the state’s FEMA NFHL resource.
- Ask a lender for side-by-side preapprovals or estimates for FHA and conventional that include MIP or PMI, the upfront FHA premium, taxes, and HOA dues.
- If you are buying a condo, confirm project status early using HUD’s condo lookup and your lender’s conventional project review.
- If you are income-eligible, explore MassHousing Down Payment Assistance. The 2025 expansion offers up to 25,000, and in some cases up to 30,000 in assistance, which can change your loan choice. Start with the MassHousing DPA announcement.
What this means for sellers on Cape Cod
Know which financing types your likely buyers can use at your price point. If your condo is not FHA approved, your buyer pool may lean conventional. If your list price is above the FHA limit, expect conventional or jumbo financing and possibly more cash-heavy offers. Encourage buyers to confirm flood, HOA, and tax costs early so financing does not derail your timeline.
Ready to map your options to the Falmouth market and your budget? Reach out for a clear, neighborly plan that fits your goals. Connect with John Delellis to start a no-pressure conversation.
FAQs
Can I use FHA for a higher-priced Cape Cod home?
- Only if your loan amount stays at or below the FHA county limit. Many Cape Cod listings exceed that cap, so check limits before you write an offer.
How do FHA MIP and conventional PMI compare over time?
- FHA adds an upfront premium plus monthly MIP, while conventional PMI can be canceled as you reach 20 percent equity and automatically ends at 78 percent, subject to conditions.
Are Falmouth condos easy to finance with FHA?
- Not always. FHA needs project approval or a single-unit approval, and conventional has its own project tests. Verify the association’s status before you commit.
Do flood zones affect my mortgage choice on Cape Cod?
- Yes. High-risk FEMA zones trigger lender-required flood insurance, which changes your monthly cost and can influence which loan feels most affordable.
Can I combine MassHousing down payment assistance with FHA?
- Often yes. MassHousing’s 2025 DPA can pair with eligible first mortgages, including FHA or conventional, subject to program rules and income limits.
