Is FHA cheaper than conventional?

It depends on your credit score and down payment. FHA is usually cheaper for borrowers with credit scores below 680 because the FHA interest rate does not rise as steeply with lower scores. Conventional is usually cheaper for borrowers with scores above 680 because PMI drops off at 80% LTV while FHA MIP typically lasts the life of the loan.

What is the minimum down payment for FHA vs conventional?

FHA requires 3.5% down with a credit score of 580 or higher (10% down if score is 500-579). Conventional loans allow as little as 3% down for first-time homebuyers (Fannie Mae HomeReady and Freddie Mac Home Possible programs) or 5% down for most other borrowers. Both require mortgage insurance when the down payment is below 20%.

How long do you pay MIP on an FHA loan?

For FHA loans originated after June 3, 2013, MIP lasts for the life of the loan if your down payment is less than 10%. With 10% or more down, MIP is removed after 11 years. The only way to remove MIP on most FHA loans is to refinance into a conventional mortgage once you reach 20% equity.

When can I cancel PMI on a conventional loan?

Federal law (the Homeowners Protection Act) requires lenders to automatically cancel PMI when your loan-to-value ratio reaches 78% of the original home value, provided you are current on payments. You can request earlier cancellation at 80% LTV. FHA loans do not have this automatic cancellation for loans originated after June 2013 with less than 10% down.

Can I switch from FHA to conventional later?

Yes. The most common path is a conventional refinance once your credit improves or your home equity reaches 20%, allowing you to drop mortgage insurance entirely. This is called an FHA-to-conventional refi. Many borrowers use this strategy to escape the lifetime MIP on FHA loans.

What credit score do I need for FHA vs conventional?

FHA allows scores as low as 500 with 10% down, or 580 with 3.5% down. Conventional loans typically require 620 minimum, with the best rates reserved for 740+. If your score is 620-679, FHA usually offers a lower interest rate; above 680, conventional usually wins because of lower mortgage insurance costs.

FHA vs Conventional Loan: Which Is Cheaper in 2026?

FHA and conventional loans are the two most common mortgages in the United States. They differ in how they're backed, who qualifies, and how much mortgage insurance you'll pay. This guide compares them with real numbers, MIP vs PMI math, and two worked examples — one for a borrower with a 640 credit score and one with a 720 credit score — so you can see which side wins.

Quick answer: If your credit score is below 680 and you have less than 10% down, the FHA loan calculator usually shows a lower monthly payment. If your score is 680 or higher with at least 5% down, the conventional mortgage calculator usually wins because PMI is cheaper than MIP and disappears entirely at 80% LTV.

FHA vs Conventional: The Core Difference

An FHA loan is insured by the Federal Housing Administration, a division of HUD. A conventional loan is not insured by any government agency — it conforms to guidelines set by Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy most U.S. mortgages. Because the FHA insures the lender against loss, FHA loans have more flexible qualification (lower credit scores, smaller down payments). Conventional loans are stricter on credit but cheaper on insurance if you have good credit.

Both loan types let you buy a primary residence, refinance, or do a cash-out refinance. Only conventional loans can be used for second homes and investment properties. For an investment property, compare conventional against a DSCR loan calculator or hard money loan calculator.

At-a-Glance Comparison

Feature	FHA Loan	Conventional Loan
Backed by	Federal Housing Administration (HUD)	Fannie Mae / Freddie Mac
Minimum down payment	3.5% (580+ score) or 10% (500-579)	3% (first-time) or 5% (most loans)
Minimum credit score	580 (3.5% down) or 500 (10% down)	620 typical lender minimum
Upfront mortgage insurance	1.75% UFMIP (can be financed)	None
Monthly mortgage insurance	0.15% – 0.75% annual MIP (typically 0.55%)	PMI 0.15% – 2.0% based on score/LTV
Insurance cancellation	Life of loan (<10% down) or 11 years (≥10% down)	Automatic at 78% LTV; request at 80%
Occupancy	Primary residence only	Primary, second home, investment
Loan limit (2026, 1-unit)	$541,287 – $1,249,125 (county-based)	$832,750 conforming; jumbo above
Seller concessions	Up to 6% of price	3% – 9% based on down payment

What Is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA does not lend directly — it insures approved lenders against borrower default. That insurance lets lenders offer 3.5% down payments and accept credit scores as low as 580 (3.5% down) or 500 (10% down). The trade-off is two mortgage insurance premiums: an upfront premium of 1.75% of the loan amount (UFMIP) and an annual premium of 0.15% – 0.75% paid monthly (MIP). For most 30-year loans with less than 5% down, the annual MIP rate is 0.55%, and it lasts for the life of the loan unless you put at least 10% down (in which case MIP drops off after 11 years).

FHA loans are popular with first-time homebuyers, borrowers rebuilding credit, and anyone whose debt-to-income ratio might not pass conventional underwriting. For the rules behind these numbers, see HUD Handbook 4000.1 and our DTI ratio guide.

What Is a Conventional Loan?

A conventional loan is any mortgage that conforms to Fannie Mae or Freddie Mac purchase guidelines. There's no government insurance — the lender takes the full risk, which is why conventional loans have stricter credit requirements. The minimum down payment is 3% for first-time homebuyers (under Fannie Mae HomeReady and Freddie Mac Home Possible) and 5% for most other borrowers. Mortgage insurance (PMI) is required when you put less than 20% down, but it can be canceled once you reach 80% loan-to-value — a major advantage over FHA's lifetime MIP.

Conventional loans come in conforming (under the FHFA limit, $832,750 in 2026) and jumbo (above the limit) varieties. Most conventional loans are 15-, 20-, or 30-year fixed-rate mortgages, though adjustable-rate versions exist — see our fixed vs adjustable rate guide for the trade-offs.

Down Payment Comparison

The down payment you can afford often decides which loan you should pick. Here's how FHA and conventional compare on a $400,000 home:

Scenario	Down Payment %	Cash at Closing	Loan Amount
FHA minimum (580+ score)	3.5%	$14,000	$386,000
Conventional first-time	3%	$12,000	$388,000
Conventional standard	5%	$20,000	$380,000
Avoid MI entirely	20%	$80,000	$320,000

Don't forget closing costs — typically 2% – 5% of the loan amount on top of the down payment. FHA allows seller concessions up to 6% of the price to cover these; conventional allows 3% – 9% depending on down payment.

Credit Score Requirements

Credit score is the single biggest factor in choosing FHA vs conventional. FHA's lower minimums are designed for borrowers with blemished credit. Conventional's higher bar rewards clean credit histories with cheaper mortgage insurance.

500 – 579: FHA only, with 10% down. No conventional option.
580 – 619: FHA only at 3.5% down. Conventional is rarely available.
620 – 679: Both qualify. FHA usually offers a lower rate, but conventional PMI may be cheaper overall. Run both calculators.
680 – 739: Both qualify. Conventional usually wins because PMI tiers drop sharply and you'll cancel it at 80% LTV.
740+: Conventional wins clearly. Best rate tier; PMI is cheap and short-lived.

For a deeper look at how DTI ratios also affect qualification, see our DTI ratio guide.

Mortgage Insurance: MIP vs PMI

This is where the math gets decisive. Mortgage insurance is required on both FHA (always) and conventional (when down payment is under 20%) loans, but the structure differs sharply.

FHA MIP (Mortgage Insurance Premium)

Upfront MIP (UFMIP): 1.75% of the base loan amount, paid at closing or rolled into the loan. On a $400,000 loan: $7,000.
Annual MIP (paid monthly): 0.55% for most 30-year loans with under 5% down. On a $400,000 loan: about $183 per month.
Duration: Life of the loan if you put less than 10% down (and the loan was originated after June 3, 2013). Removed after 11 years if you put 10% or more down.

Conventional PMI (Private Mortgage Insurance)

Upfront cost: None. (You can pay a one-time "single-premium" PMI, but most borrowers choose monthly.)
Monthly PMI: 0.15% – 2.0% of the loan balance annually, based on credit score and LTV. A 760-score borrower at 95% LTV might pay 0.28%; a 640-score borrower at 95% LTV might pay 0.95%.
Duration: Automatically canceled at 78% LTV (federal law). You can request cancellation at 80% LTV.

Over the life of a 30-year loan, the difference compounds. On a $400,000 loan with 3.5% down at 6.5% interest, FHA MIP totals roughly $66,000 if you never refinance (assuming you keep the loan 30 years). A conventional loan with PMI canceled at year 8 might total $12,000 in PMI for the same period. That $54,000 difference is the single biggest reason to prefer conventional when you can qualify.

Loan Limits

Both loan types cap how much you can borrow, but the caps differ:

FHA loan limits (2026): Floor of $541,287 in low-cost counties; ceiling of $1,249,125 in high-cost areas. Limits are 115% of the local median home price, subject to the floor and ceiling. Look up your county on the HUD website.
Conventional conforming limit (2026): $832,750 in most areas (1-unit property); up to $1,249,125 in high-cost areas. Loans above these limits are "jumbo" and follow different underwriting.

If you need a loan above these limits, you're in jumbo mortgage territory, which typically requires 10% – 20% down and a 700+ credit score.

When FHA Wins

FHA is usually the better choice when:

Your credit score is 679 or lower (FHA rates don't rise as steeply with lower scores).
You can only afford 3.5% down and don't qualify for a 3% conventional first-time program.
Your DTI is between 45% and 56.99% — FHA's manual underwriting is more forgiving.
You plan to move or refinance within 5 – 7 years (so the lifetime MIP doesn't compound against you).
You want to use the FHA 203(k) rehab loan to finance home improvements.

When Conventional Wins

Conventional is usually the better choice when:

Your credit score is 680 or higher (PMI rates drop dramatically).
You can put down at least 5% — preferably 10% to push PMI rates down further.
You plan to stay in the home long enough to reach 80% LTV and cancel PMI.
You're buying a second home or investment property (FHA doesn't allow these).
You're buying a condo that isn't on the FHA-approved condo list.

Worked Example: $400,000 Home, 30-Year Fixed

Let's run two scenarios with real numbers to show how the comparison changes with credit score.

Scenario A: 640 Credit Score, 3.5% Down

On a $400,000 home with 3.5% down, the loan is $386,000. At a 640 score, the borrower qualifies for both FHA (~6.75% rate) and conventional (~7.25% rate).

FHA path: $386,000 base loan + $6,755 UFMIP rolled in = $392,755 effective principal. At 6.75% over 360 months: P&I ≈ $2,546. Add 0.55% annual MIP ($180/month). Total: $2,726/month. 5-year cost: ~$166,000.
Conventional path: $386,000 loan at 7.25% over 360 months: P&I ≈ $2,629. Add PMI at ~0.95% annual ($306/month). Total: $2,935/month. 5-year cost: ~$178,000.
Winner: FHA by ~$209/month and ~$12,000 over 5 years.

Scenario B: 720 Credit Score, 5% Down

Same $400,000 home, but the borrower has a 720 score and 5% down ($20,000). Loan is $380,000. Both loans qualify for similar rates (~6.5%).

FHA path: $380,000 base loan + $6,650 UFMIP rolled in = $386,650. At 6.5% over 360 months: P&I ≈ $2,442. Add 0.55% MIP ($177/month). Total: $2,619/month. MIP never comes off (under 10% down). 5-year cost: ~$161,000. Lifetime cost (30yr): ~$943,000.
Conventional path: $380,000 loan at 6.5%: P&I ≈ $2,401. PMI at ~0.45% ($143/month) until LTV hits 80% (typically year 8). Total during PMI: $2,544/month. After PMI cancels: $2,401/month. 5-year cost: ~$153,000. Lifetime cost: ~$891,000.
Winner: Conventional by $75 – $218/month and ~$52,000 over the loan life.

Rates and PMI tiers change constantly. Use the FHA loan calculator and mortgage calculator to plug in your own numbers, and verify the APR with your lender's Loan Estimate.

FHA vs Conventional vs VA

If you (or your spouse) are an eligible veteran, active-duty service member, or surviving spouse, the VA loan calculator usually beats both FHA and conventional. VA loans offer 0% down, no monthly mortgage insurance, and competitive rates — the only cost is a one-time VA funding fee (2.15% – 3.3%, with disability exemptions). For a side-by-side:

Feature	FHA	Conventional	VA
Down payment	3.5%	3% – 5%	0%
Monthly MI	Yes (life of loan)	Yes (to 78% LTV)	None
Upfront fee	1.75% UFMIP	None	2.15% – 3.3% funding fee
Occupancy	Primary only	Any	Primary only

How to Decide

Use this decision flow:

Are you VA-eligible? If yes, start with the VA loan calculator. VA wins for most eligible borrowers.
Is your credit score under 620? If yes, FHA is your only realistic option.
Is your credit score 620 – 679? Run both calculators. FHA usually wins on monthly payment, but conventional may win on total cost if you can cancel PMI quickly.
Is your credit score 680+? Conventional usually wins. Use the mortgage calculator to confirm.
Are you buying a second home or investment? Conventional only (or DSCR for investors).
Are you buying a fixer-upper? FHA 203(k) and Fannie Mae HomeStyle® Renovation both exist — compare them.

Whatever you choose, get Loan Estimates from at least three lenders (federal law requires they use the same form, so you can compare line by line). For strategies on paying down either loan faster, see our loan payoff strategies guide and the amortization guide.

Sources & Methodology

The rates, fees, and rules on this page come from official U.S. government and industry sources. We refresh this guide when those sources publish updates.

This guide is for educational purposes only and is not financial advice. Your lender's Loan Estimate is the authoritative source for your specific loan terms. See our editorial standards for how we maintain accuracy.