FHA vs. Conventional: A Side-by-Side Guide for Smart Buyers

Brett Shoemaker, Broker Owner at Kingdom Mortgage LLC

FHA vs. Conventional: A Side-by-Side Guide for Smart Buyers

FHA vs. Conventional: A Side-by-Side Guide for Smart Buyers

Down Payment: Almost a Tie

Mortgage Insurance: Where the Real Cost Lives

Credit Flexibility vs. Stricter Property Standards

When Conventional Wins

When FHA Wins

The Bottom Line

Compare Your Options

LOAN PROGRAMS

Loan Comparison · April 8, 2026

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The most common question I get from first-time buyers: "Should I go FHA or conventional?" The answer isn't one-size-fits-all. Each program serves a different buyer profile, and choosing the wrong one can cost you thousands over the life of the loan. Here's a real comparison — not marketing fluff — so you can make the smart choice.

FHA requires 3.5% down. Conventional loans start at 3% for qualified first-time buyers, and 5% for everyone else. On a $350,000 home, that's roughly $12,250 for FHA vs. $10,500 for conventional (first-time) or $17,500 (repeat buyer). If you're a first-time buyer with decent credit, conventional actually wins here. But if your credit is below 680 or you're not a first-timer, FHA's 3.5% is often the lower barrier.

This is where the two programs diverge dramatically. FHA charges an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount — usually rolled into the loan — plus an annual MIP of 0.55% (for most borrowers) that you pay monthly. Here's the kicker: FHA mortgage insurance never drops off for most borrowers. If you put less than 10% down, you pay MIP for the life of the loan. Even at 10% or more, it stays for 11 years.

Conventional PMI is different. There's no upfront premium, and once you reach 20% equity — either through appreciation, principal paydown, or a combination — you can request cancellation. Automatic cancellation happens at 22% equity. On a home in an appreciating market, that could happen in 2–3 years instead of 11 or 30.

FHA

Down payment: 3.5%

Credit minimum: 580

Upfront MIP: 1.75%

Monthly MIP: ~0.55%

MIP drops off: Rarely / 11 yrs min

Conventional

Down payment: 3%–5%

Credit minimum: 620

Upfront MI: $0

Monthly PMI: ~0.3%–1.5%

PMI drops off: At 20% equity

FHA is more forgiving with credit. You can qualify with a 580 score, and the debt-to-income ratio limits are more generous (up to 50% in some cases with compensating factors). Conventional loans typically want 620 or higher, and DTI caps around 43–45% for the best pricing. If your credit took a hit during the pandemic or you carry some student loan debt, FHA is often the easier path.

The tradeoff: FHA appraisals are stricter. The appraiser checks health and safety conditions — peeling paint, broken windows, missing handrails — and can require repairs before closing. Conventional appraisals focus primarily on value and marketability. If you're buying a fixer-upper or a short sale with deferred maintenance, conventional may be smoother.

If you have a 680+ credit score, plan to put at least 5% down, and want the option to drop mortgage insurance as soon as possible, conventional is usually cheaper long-term. The PMI rate at 720+ is shockingly low — sometimes under 0.3% annually. Over five years, the savings versus FHA MIP can exceed $5,000.

If your credit is under 640, your DTI is pushing limits, or you need the lowest possible down payment and rate without perfect credit, FHA is designed for you. The program exists specifically to help buyers who don't fit the conventional credit box. Don't let stigma push you into a higher-rate conventional loan you barely qualify for.

"The best loan isn't the one with the lowest rate. It's the one that costs you the least over the time you actually own the home."

Run both scenarios with real numbers. Factor in how long you'll stay, how fast your market appreciates, and whether you can stomach the FHA MIP long-term. The wrong choice here doesn't just cost you at closing — it costs you every month for years.

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I run side-by-side FHA and conventional scenarios for every buyer so you can see the real five-year cost difference. Let's find the right program for your situation.

Send me your details and I'll prepare a real FHA vs. conventional comparison with total cost over 5 and 10 years.

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FHA vs. Conventional: A Side-by-Side Guide for Smart Buyers | Brett Shoemaker | Kingdom Mortgage LLC