FHA vs. Conventional: Which Mortgage Is Right for You?
Compare FHA and conventional loans side-by-side. See the differences in down payment, credit requirements, mortgage insurance costs, and total long-term savings to make the best choice.
FHA vs. Conventional: The Key Differences
FHA and conventional loans are the two most common mortgage types. FHA is easier to qualify for with lower credit and down payment requirements, while conventional offers lower long-term costs for borrowers with stronger financial profiles. The right choice depends on your credit score, down payment, and how long you plan to keep the loan.
Side-by-Side Comparison
| Feature | FHA | Conventional |
|---|---|---|
| Min. Down Payment | 3.5% (580+ credit) | 3%–5% |
| Min. Credit Score | 580 (500 with 10% down) | 620 |
| Mortgage Insurance | 1.75% upfront + 0.55%/yr (life of loan) | PMI (removable at 80% LTV) |
| Max DTI | 43%–50% | 43%–45% |
| Property Types | Primary residence only | Primary, second home, investment |
| Appraisal Standards | Stricter (HUD minimum standards) | Standard appraisal |
| Loan Limits (2024) | $498,257–$1,149,825 | $766,550–$1,149,825 |
| Gift Funds | 100% of down payment | 100% with 20% down, limits below |
The Mortgage Insurance Difference
This is the biggest factor in the FHA vs. conventional decision. FHA charges mortgage insurance (MIP) for the life of the loan if you put less than 10% down. Conventional PMI cancels automatically at 78% LTV or by request at 80% LTV. Over 30 years, this difference can cost $10,000–$30,000+ more with FHA.
- FHA MIP: $5,006 upfront + $131/month for 30 years = ~$52,000 total insurance cost
- Conventional PMI: ~$120/month until 80% LTV (~7 years) = ~$10,000 total insurance cost
- Savings with conventional: ~$42,000 over the life of the loan
When to Choose FHA
- Credit score is below 680 — FHA rates and approval odds are better for lower scores
- DTI is above 43% — FHA allows up to 50% with compensating factors
- Recent bankruptcy or foreclosure — FHA has shorter waiting periods
- Down payment is entirely gift funds — FHA allows 100% gift for the full down payment
When to Choose Conventional
- Credit score is 700+ — you will get competitive rates without FHA's insurance burden
- Down payment is 10%+ — PMI will be low and drop off relatively quickly
- You plan to stay long-term — the PMI removal advantage compounds over time
- Buying a second home or investment property — FHA is primary residence only
If your credit score is 700+ and you have 10% or more to put down, conventional is almost always cheaper long-term. If your credit is below 680 or you have minimal savings, FHA gets you into a home sooner — and you can always refinance to conventional later when your equity and credit improve.
Use our FHA calculator or mortgage calculator to compare payments side-by-side. Check FHA rates and conventional rates for today's pricing.