FHA vs Conventional Loan: Which Is Right for You?
FHA and conventional loans are the two most common mortgage types. Each is best for different buyers. This guide compares them across credit, down payment, costs, and long-term flexibility. For a broader look at every loan program — including VA, USDA, and jumbo — see our [complete guide to mortgage types](/mortgage-types-explained).
Quick answer
Choose FHA if you have a lower credit score (under 680) or limited down payment (under 5%). Choose conventional if you have 5%+ down and a 680+ credit score — it's usually cheaper long-term.
Quick comparison
- Down payment: FHA 3.5% (with 580+ credit); conventional usually 3–5% min.
- Credit score: FHA 580+ (or 500 with 10% down); conventional typically 620+, best rates at 740+.
- Mortgage insurance: FHA requires MIP (upfront 1.75% + annual 0.55%) often for the life of the loan; conventional PMI drops automatically at 78% LTV.
- Loan limits (2026): FHA $498,257 (low cost), $1,149,825 (high cost); conventional similar.
- Property type: FHA stricter on condition; conventional more flexible.
When FHA is the right call
- Credit score below 680 — FHA accepts you when conventional may not.
- Less than 5% down — FHA's 3.5% with 580 credit is hard to beat.
- First-time buyer with limited savings — easier qualification.
- DTI ratios up to 50% in some cases — more flexibility.
When conventional wins
- Credit 680+ and 5%+ down — better interest rate, cheaper long-term.
- 20%+ down — no PMI at all.
- Investment property or second home — FHA doesn't allow these.
- Plan to keep the mortgage long term — conventional PMI eventually drops; FHA MIP doesn't (unless you put 10%+ down).
How FHA and conventional fit into the bigger picture
FHA and conventional aren't your only options. VA loans beat both for eligible veterans, USDA loans offer 0% down in rural areas, and jumbo loans handle homes above conforming limits. Our mortgage types explained guide walks through each program side by side so you can rule options in or out before applying.
Total cost example: $300K home
FHA with 3.5% down: ~$2,300/month all-in (P&I, taxes, insurance, MIP). Conventional with 5% down: ~$2,250/month. Conventional with 20% down: ~$1,920/month. Over 30 years the differences add to tens of thousands. Run your own numbers in the mortgage calculator or compare cash needed in the down payment calculator.
Use the calculator
Frequently Asked Questions
Can I refinance from FHA to conventional later?
Yes — and many people do once they have 20%+ equity, to drop the MIP. Watch for closing costs vs monthly savings.
Does FHA have a higher interest rate?
Usually slightly lower than conventional for similar credit, but the MIP premium often makes the all-in cost higher.
Are there income limits?
Neither loan has income limits — but USDA and some down payment assistance programs do.
What about VA loans?
If you're a veteran or active-duty service member, VA is almost always the best option — 0% down, no PMI, low rates.
Related Guides
More reading from the Mortgage & Affordability library.
The 28/36 Rule Explained: How Lenders Decide What You Can Afford
The 28/36 rule in plain English: front-end vs back-end DTI, lender variations, worked examples for 5 income levels, and how to apply it before you shop.
Read guideMortgage & Affordability5% vs 20% Down Payment: Which Is Better?
5% vs 20% down payment compared — monthly cost, PMI, total interest, and how long it takes to save the difference.
Read guideMortgage & AffordabilityHow Mortgage Amortization Works
Understand exactly how each mortgage payment is split between interest and principal — and how that ratio shifts dramatically over time.
Read guideRelated Calculators
Put the numbers to work with our free calculators.
Mortgage Calculator
Estimate your monthly mortgage payment in seconds.
Affordability Calculator
See the home price you can comfortably afford.