FHA vs Conventional Loans: How to Compare
Published · Last reviewed
Educational comparison only. Not a quote, recommendation, or offer of credit.
FHA Loan vs Conventional Loan: side by side
| FHA Loan | Conventional Loan | |
|---|---|---|
| Backed by | Federal Housing Administration insurance | Fannie Mae or Freddie Mac guidelines |
| Typical minimum credit score | Often around 580 for the lowest down payment tier | Usually around 620, higher for the best pricing |
| Minimum down payment | 3.5% with qualifying credit | 3% to 5% for many first time programs |
| Mortgage insurance | Upfront premium plus monthly MIP, often for the life of the loan | Private mortgage insurance that can be removed once equity reaches the lender threshold |
| Loan limits | FHA county loan limits, lower in most areas | Conforming loan limits set by FHFA |
| Property condition rules | FHA minimum property standards apply | Standard appraisal, fewer condition based hurdles |
| Debt to income flexibility | Often more accommodating with compensating factors | Tighter with weaker credit, more flexible with strong reserves |
| Assumable | Generally assumable by a qualified buyer | Generally not assumable |
When each option tends to make more sense
When fha loan tends to fit
When borrowers gravitate toward FHA
- Credit history is still being rebuilt and pricing on conventional looks rough
- Down payment savings are limited and gift funds are part of the plan
- Debt to income is higher and conventional automated underwriting keeps pushing back
- Long term plan is to refinance later once equity and credit improve
When conventional loan tends to fit
When borrowers gravitate toward conventional
- Credit is in solid shape and the down payment is closer to 5% or more
- The plan is to drop mortgage insurance once equity hits the lender threshold
- The property is a condo, second home, or investment property
- Loan size is above FHA county limits but inside conforming limits
Run the numbers
- Affordability Calculator
See what monthly payment a price point implies under each program.
- Mortgage Payment Calculator
Compare principal, interest, taxes, insurance, and mortgage insurance.
- DTI Calculator
Check how the proposed payment stacks up against income.
- Can I Qualify?
Walk through eligibility questions for each program.
Frequently asked questions
Is an FHA loan only for first time buyers?
Does FHA mortgage insurance ever come off?
Can a conventional loan also be 3% down?
Which option has a lower payment?
Are FHA loans only for cheaper homes?
Can a borrower switch from FHA to conventional later?
Other decision guides
First-Time Buyer Playbook
A practical checklist with true monthly-payment math, loan choices, cash-to-close planning and a fillable buying worksheet.
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