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

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.