Comparison · Buying
FHA vs conventional
Both are mainstream, both are widely available, and the right answer is decided by two things: your credit score and how tight your ratios are.
Is an FHA or conventional loan better?
Conventional is usually cheaper if you qualify, because its mortgage insurance is removable — automatically at 78% loan-to-value. FHA's annual premium runs for the life of the loan below 10% down. FHA wins when credit is bruised or debt-to-income is tight, which is exactly when conventional says no.
| Conventional | FHA | |
|---|---|---|
| Minimum down | 3% for qualified first-time buyers | 3.5% at 580+, or 10% at 500–579 |
| Credit floor | Typically 620 | 580 for 3.5% down |
| Mortgage insurance | PMI, removable | MIP, life of loan below 10% down |
| MI removal | Automatic at 78% LTV | Only at 10%+ down, after 11 years |
| Upfront fee | None | 1.75%, financed |
| Debt-to-income | Tighter | More forgiving |
| Best when | Credit and ratios are healthy | Credit or ratios are tight |
Conventional usually wins when
- Your credit score is 680 or higher.
- Your debt-to-income ratio is comfortable.
- You want the mortgage insurance to disappear without refinancing.
- You are buying a second home or an investment property, which FHA does not allow.
FHA usually wins when
- Your credit score is below roughly 660.
- Your debt-to-income ratio is stretched.
- You have a recent credit event with a shorter FHA waiting period.
- You are pairing the loan with down payment assistance that requires FHA.
Worked through
The comparison people miss is the exit. FHA mortgage insurance below 10% down never goes away on its own, so the plan has to include refinancing out of it once you hold 20% equity. Conventional PMI removes itself. Over a full loan term that difference is frequently larger than any rate gap between the two.
Frequently asked
Does FHA mortgage insurance ever go away?
Only if you put at least 10% down, in which case the annual premium ends after 11 years. Below 10% down it runs for the life of the loan, and the normal exit is refinancing into a conventional loan once you have 20% equity.
What credit score do you need for each?
FHA's own floor is 580 for 3.5% down, though lenders commonly overlay higher. Conventional generally starts around 620, and pricing improves markedly above 680 and again above 740.
Can you use FHA for an investment property?
No. FHA requires the property to be your primary residence. Conventional financing, DSCR loans and portfolio products cover investment purchases.
Still not sure which applies to you?
Tell us the situation and we'll tell you which side of the comparison you're on.