FHA vs. conventional isn't about which loan is "better" — it's about which is better for your credit score and down payment. Here's the decision framework.

Side-by-side comparison

FeatureFHA loanConventional loan
Min. credit score580 (3.5% down) / 500 (10% down)620 (rates better at 700+)
Min. down payment3.5%3%
Upfront mortgage insurance1.75% of loan (UFMIP)None
Annual mortgage insurance0.55–0.85% of loan0.3–1.5% of loan
MIP/PMI removalLife of loan (if <10% down)At 20% equity (automatic)
Loan limits (2026)$498,257–$1,209,750Up to $806,500 standard
Seller concessionsUp to 6%3% (under 10% down), 6% (over 25% down)
Property conditionStricter — must be move-in readyMore flexible

The mortgage insurance gap — the most important difference

FHA's biggest drawback: MIP that lasts the life of the loan if you put less than 10% down.

Conventional PMI disappears once you reach 20% equity — either through payments or appreciation. On FHA, if you put 3.5% down, you pay MIP for 30 years unless you refinance into a conventional loan.

Loan typeUpfront costAnnual insuranceMonthly add (on $300k loan)Removable?
FHA (3.5% down)1.75% = ~$5,2500.85%~$213/moOnly by refinancing
Conventional (5% down)None0.85%~$213/moYes — at 20% equity
Conventional (10% down)None0.65%~$163/moYes — at 20% equity
Conventional (20% down)NoneNone$0N/A

Estimates on a $300,000 loan at 6.5% 30yr fixed.

The rate reality — FHA vs. conventional at different credit scores

FHA rates are generally close to conventional rates, but the total cost picture changes dramatically based on credit score:

  • Credit score 580–649: FHA often wins. Conventional rates at this level are punishing, and PMI rates are high. FHA's standardized MIP rate is more predictable.
  • Credit score 650–699: Run the numbers for both. Conventional PMI and rates may be competitive, especially with 10%+ down.
  • Credit score 700+: Conventional typically wins — better rates, PMI that goes away, no upfront MIP.

FHA loan limits by county

FHA loans have maximum loan amounts that vary by county. In 2026:

  • Low-cost areas: $498,257 limit (most of rural America)
  • High-cost areas: Up to $1,209,750 (parts of CA, NY, HI, AK)
  • Most major metros fall between these extremes

If you're buying above the FHA limit for your county, you'll need a conventional or jumbo loan. Check your county limit at the HUD mortgage limits page →

Property requirements — a key FHA difference

FHA loans have stricter property condition requirements than conventional loans. The home must be move-in ready — FHA appraisers will flag issues like:

  • Peeling paint (lead paint risk in older homes)
  • Roof damage or missing shingles
  • Inoperable HVAC, water heater, or plumbing
  • Safety hazards (exposed wiring, structural issues)

This makes FHA loans harder to use on fixer-uppers or distressed properties. Conventional loans are generally more flexible.

When to choose each

Choose FHA if: Your credit score is below 700 · You have limited savings for a large down payment · Your debt-to-income ratio is high (FHA allows up to 57% back-end DTI in some cases) · You're buying a move-in ready home in the FHA loan limit
Choose conventional if: Your credit score is 700+ · You can put 10–20% down · You want PMI to go away · The home needs work · Your loan exceeds FHA limits in your county

The refinance path out of FHA

Many buyers use FHA to get in the door at lower credit scores, then refinance into a conventional loan once their score and equity improve. This eliminates the lifetime MIP requirement. The strategy works well if:

  • You bought with 3.5% down and expect equity to grow
  • You plan to stay long enough to break even on refinance costs (typically 2–4 years)
  • You're actively building your credit score

Use the refinance calculator to model your break-even →

Bottom line

  • FHA: lower credit requirements (580+), but MIP lasts the life of the loan at 3.5% down
  • Conventional: better for 700+ credit, PMI removes at 20% equity
  • FHA has loan limits — check your county if buying above $500k
  • FHA is stricter on property condition — not ideal for fixer-uppers
  • Using FHA to buy then refinancing to conventional is a viable strategy

Calculate your FHA monthly payment → · Compare conventional payment →

More resources

Shopping multiple lenders is just as important as choosing the right loan type — rates vary by 0.25–0.5% between lenders on the same file. Use the lender comparison page → to see your options side by side.

FAQ

Frequently Asked Questions