FHA and conventional loans work for different buyers. FHA helps when your credit is bruised or your down payment is thin. Conventional loans tend to price better when your credit is strong, and PMI can disappear once you build enough equity. Your best option depends on your score, cash down, loan size, and how long you expect to keep the mortgage.
The short version
| Factor | FHA | Conventional |
|---|---|---|
| Minimum down payment | 3.5% | 3-20% |
| Minimum credit score | 580 | 620 |
| Mortgage insurance | MIP for life of loan (if <10% down) | PMI can come off at 20% equity |
| Loan limits | $498,257 (2024) | $766,550 (2024) |
| Usually best for | First-time buyers and lower scores | Higher scores and bigger loans |
When FHA makes sense
- Your credit score is below the range where conventional pricing gets good.
- You have 3.5% down and need more forgiving underwriting.
- Your loan amount fits the FHA limit in your county.
When conventional makes sense
- Your score is 620+, and especially if it is 740+.
- You expect to reach 20% equity and drop PMI.
- You need a loan above the FHA limit in your county.
Compare the full monthly payment
Look at the full PITI payment, not just principal and interest. FHA mortgage insurance, conventional PMI, taxes, homeowners insurance, and HOA dues can move the number more than you expect.
Frequently asked questions
What is the FHA mortgage insurance premium?
FHA MIP has two parts: an upfront premium of 1.75% of the loan amount and an annual premium of 0.55-1.05%, depending on loan term and LTV.
Can I refinance from FHA to conventional?
Yes. Once you have 20% equity, a conventional refinance can remove FHA MIP and may lower the monthly payment.
What credit score do I need for a conventional loan?
Most conventional loans start at 620. Scores of 740+ usually get the best pricing. If you are below 620, FHA is usually easier to access.
Are FHA loan limits the same everywhere?
No. FHA limits change by county. High-cost areas can go as high as $1,149,825 in 2024.
Methodology note: Loan limit figures per HUD 2024 FHA loan limits. MIP rates per HUD Mortgagee Letter 2023-05.