FHA vs Conventional Loans
Compare FHA and conventional mortgage loans side by side to find which option fits your financial situation and homebuying goals.
FHA Loan
Advantages
- Down payment as low as 3.5 percent with a 580+ credit score
- More lenient credit requirements, with scores as low as 500 accepted with 10 percent down
- Higher debt-to-income ratios allowed, up to 57 percent in some cases
- Sellers can contribute up to 6 percent of the purchase price toward closing costs
Drawbacks
- Mortgage insurance premium (MIP) is required for the life of the loan with less than 10 percent down
- Upfront MIP of 1.75 percent added to the loan balance at closing
- Property must meet FHA minimum property standards, which can limit your options
Best For
Buyers with lower credit scores or limited savings for a down payment who need flexible qualification requirements.
Conventional Loan
Advantages
- Private mortgage insurance (PMI) can be removed once you reach 20 percent equity
- No upfront mortgage insurance premium required
- More property types eligible, including investment properties and second homes
- Lower overall cost over the life of the loan for borrowers with strong credit
Drawbacks
- Typically requires a minimum credit score of 620
- Stricter debt-to-income ratio requirements, usually capped at 45 percent
- Down payment of at least 3 percent required, with PMI until 20 percent equity is reached
Best For
Buyers with good credit scores (680+) and stable income who want to avoid long-term mortgage insurance costs.
Key Differences
| Category | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | 3.5% with 580+ credit score | 3% with PMI until 20% equity |
| Credit Score Minimum | 500 (with 10% down) or 580 (with 3.5% down) | 620 minimum, best rates at 740+ |
| Mortgage Insurance | MIP required for life of loan (if <10% down) | PMI removed at 20% equity |
| Loan Limits (2025) | Up to $524,225 (higher in high-cost areas) | Up to $806,500 (higher in high-cost areas) |
| Property Requirements | Must meet FHA minimum property standards | Standard appraisal, fewer restrictions |
The Bottom Line
FHA loans provide an accessible path to homeownership for buyers who need flexible credit and down payment requirements. Conventional loans are the stronger choice when you have solid credit and want to eliminate mortgage insurance sooner. Talk to a loan officer to run the numbers for your specific situation, because the right answer depends on your credit profile, savings, and long-term plans.
Run the Numbers
Use the mortgage calculator to see how each option affects your monthly payment and total cost.
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