Feature comparison
See key differences: rates, terms, down payment requirements.
FHA vs Conventional Loan
Compare FHA and conventional mortgages for down payment, mortgage insurance, and long-term costs.
This guide is written for U.S. buyers who want realistic planning, not optimistic estimates. Numbers vary by rate, county tax levels, insurance pricing, and loan profile, so always test a conservative case before committing.
Quick answer
FHA loans typically allow lower credit scores and lower down payment, but include mortgage insurance costs that may remain longer. Conventional loans usually require stronger credit for best pricing but can become cheaper long-term, especially when PMI can be removed.
Key comparison points
- Credit profile: FHA can be more forgiving for lower scores.
- Down payment: FHA often 3.5% minimum; conventional may be 3%+ depending on program.
- Mortgage insurance: FHA MIP structure differs from conventional PMI and may last longer.
- Total cost: compare APR and 5-year ownership cost, not just initial rate.
How to choose
Run both scenarios with full monthly payment assumptions, including taxes and insurance, then compare break-even horizon and refinance options. Use the FHA Loan Calculator and Mortgage Calculator to evaluate the total monthly burden.
Bottom line
FHA can be the better entry option; conventional can be more cost-efficient over time for stronger borrower profiles. The right choice depends on current credit, down payment, and expected time in home.
FAQ
Is FHA always cheaper with lower down payment?
Not always. Lower down payment helps upfront cash, but ongoing MIP can make FHA costlier over longer ownership periods.
When does conventional usually win?
Conventional often wins when borrower credit is stronger and PMI can be removed after equity milestones are reached.