If you are comparing an FHA vs conventional loan, the biggest differences usually come down to credit requirements, down payment, mortgage insurance, loan limits, property requirements, and total borrowing costs. Neither mortgage is automatically right for every buyer, so comparing the complete loan offer is more useful than looking at just the interest rate or minimum down payment.

FHA vs conventional loan comparison showing down payment, credit score, mortgage insurance, loan limits, and home financing options in the United States.

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Quick Answer: FHA vs Conventional Loan

An FHA loan is a mortgage insured by the Federal Housing Administration and made through an FHA-approved private lender. FHA loans can allow down payments as low as 3.5% for qualifying borrowers and generally accommodate lower credit scores than most conventional loans.

A conventional loan is not insured or guaranteed by the federal government. Conventional mortgages can offer competitive pricing for borrowers with stronger credit and can have lower mortgage-insurance costs in some situations.

The important question is not simply which loan has the smaller down payment. Compare the interest rate, mortgage insurance, closing costs, monthly payment, loan term, and total cost.

FHA vs Conventional Loan: Side-by-Side Comparison

Feature	FHA Loan	Conventional Loan
Government insurance	FHA-insured	Not government-insured
Minimum down payment	As low as 3.5% for qualifying borrowers	Some programs allow as little as 3%
Credit flexibility	Generally more flexible	Requirements vary by lender/program
Mortgage insurance	FHA mortgage insurance generally required	PMI may apply with less than 20% down
PMI cancellation	Different FHA rules	PMI may be cancellable under applicable rules
Loan limits	Vary by county	Vary by county/program
Property requirements	FHA requirements apply	Conventional program/lender requirements apply
Primary residence	Generally required for standard FHA financing	Primary residence, second homes and investment properties may be possible depending on program
Best comparison method	Total loan cost	Total loan cost

CFPB says conventional loans can have PMI when the down payment is below 20%, while FHA loans generally require mortgage insurance.

1. FHA Loans Can Have a Lower Down Payment

One reason buyers consider FHA financing is the relatively low minimum required investment.

For qualifying borrowers, FHA financing can require as little as 3.5%.

For example:

Home price	3.5% down payment
$200,000	$7,000
$250,000	$8,750
$300,000	$10,500
$350,000	$12,250
$400,000	$14,000
$500,000	$17,500

The minimum FHA investment depends on the applicable FHA requirements and borrower circumstances.

You can read the full Maintain Market guide on FHA loan down payment for a detailed breakdown of the 3.5% minimum, gift funds, assistance programs, and other cash requirements.

2. Conventional Loans Can Also Have Low Down Payments

A common misconception is that conventional mortgages always require 20% down.

That is not true.

Some conventional programs can allow down payments as low as 3%, depending on the borrower, property, program, and lender requirements.

However, a low down payment can mean private mortgage insurance is required.

CFPB notes that some conventional loans with down payments below 20% require PMI, although specific requirements vary.

So a buyer comparing:

3% conventional
3.5% FHA
5% conventional
10% conventional
20% conventional

should compare the complete monthly payment and loan costs instead of focusing only on the initial cash requirement.

3. FHA Can Be More Flexible With Lower Credit Scores

Credit score requirements are one of the major differences buyers consider.

FHA loans generally allow lower credit scores than most conventional loans.

Under the FHA framework, qualifying borrowers with a score of 580 or higher can generally qualify for the 3.5% minimum required investment, while borrowers with scores between 500 and 579 may generally need a 10% minimum investment.

However, lenders can have their own underwriting requirements.

CFPB specifically notes that FHA loans allow lower credit scores than most conventional loans.

For more detail, see Maintain Market’s FHA loan requirements guide.

4. Mortgage Insurance Works Differently

This is one of the most important differences.

FHA mortgage insurance

FHA loans generally require mortgage insurance.

FHA mortgage insurance includes an upfront component and a monthly component under the applicable FHA rules. The upfront premium may be financed into the loan, which increases the loan balance and overall borrowing cost.

Conventional PMI

Conventional loans may require private mortgage insurance (PMI) when the down payment is below 20%.

CFPB says PMI rates can vary based on factors including down payment and credit score and that PMI can generally be cancelled under applicable circumstances.

This difference can have a major impact on your long-term mortgage cost.

5. FHA Mortgage Insurance Can Affect the Total Cost

A low down payment can make it easier to purchase a home, but it doesn’t necessarily mean the loan will cost less overall.

FHA mortgage insurance is generally required for FHA loans, and the cost becomes part of the overall mortgage expense.

For example, a buyer could compare:

FHA

Lower minimum down payment
More flexible credit requirements
FHA mortgage insurance

versus:

Conventional

Potentially higher credit requirements
Potentially lower mortgage insurance costs for stronger borrowers
PMI when applicable

CFPB notes that borrowers with good credit and a medium down payment may find conventional financing less expensive than FHA, while FHA can be less expensive for borrowers with lower credit scores or smaller down payments.

6. Conventional PMI May Be Removed Later

One potential advantage of conventional financing is that PMI can generally be cancelled under certain conditions.

For many conventional mortgages, homeowners can request PMI cancellation when the principal balance reaches 80% of the home’s original value, subject to applicable requirements. Automatic termination can also apply at a later point under federal law if certain conditions are met.

FHA mortgage insurance follows different rules.

This means you should not compare FHA and conventional mortgages based only on their starting monthly payment.

Think about what the mortgage insurance could cost over time.

7. FHA and Conventional Loans Have Different Loan Limits

Loan limits matter because you cannot simply borrow any amount under every mortgage program.

For 2026, FHA’s national one-unit loan-limit floor is $541,287, while the high-cost ceiling is $1,249,125. Actual FHA limits vary by county and property size.

For conventional conforming loans, the 2026 baseline limit for a one-unit property is $832,750 in most of the United States, with higher limits in designated high-cost areas.

2026 one-unit comparison

Loan type	2026 national baseline/floor	High-cost ceiling
FHA	$541,287 floor	$1,249,125
Conventional conforming	$832,750 baseline	$1,249,125

These figures are not the same as your personal borrowing limit. Your actual maximum can depend on location, property type, lender rules, income, debts, credit, and other factors.

8. FHA Has Specific Property Requirements

FHA financing isn’t based only on the borrower’s finances.

The property must also meet applicable FHA requirements.

FHA appraisal and property standards are designed to address the condition and suitability of the property for FHA financing.

That means a property that might qualify for conventional financing could require additional work before it meets FHA requirements.

HUD’s current FHA Single Family Housing Policy Handbook 4000.1 is the primary source for FHA single-family policy, and HUD published an updated version in August 2026.

9. Conventional Loans May Offer More Property Flexibility

Conventional financing covers a wide range of property and borrower situations.

Depending on the specific program and lender, conventional financing may be available for:

Primary residences
Second homes
Investment properties
Different property types

FHA’s standard single-family program is primarily designed around owner-occupied residential properties.

If you’re buying a second home or investment property, conventional financing may be one of the programs worth discussing with lenders.

The exact eligibility rules depend on the specific mortgage program.

10. Your Credit and Down Payment Can Change the Cost Difference

There isn’t one fixed answer for how much more or less an FHA loan will cost compared with a conventional loan.

The difference can change depending on:

Credit score
Credit history
Down payment
Loan amount
Interest rate
Mortgage insurance
Property location
Loan term
Closing costs
Lender pricing

For example, a borrower with strong credit and 10% to 15% available for a down payment may receive a very different conventional offer from someone with a lower credit score and only 3.5% available.

That’s why CFPB recommends comparing actual loan offers rather than relying on general rules.

FHA vs Conventional Loan: Example

Suppose you are buying a $300,000 home.

FHA at 3.5%

Down payment:

$300,000 × 3.5% = $10,500

Base amount financed before applicable FHA mortgage insurance and other adjustments:

$289,500

Conventional at 3%

Down payment:

$300,000 × 3% = $9,000

Base amount financed:

$291,000

The conventional option starts with $1,500 less cash required for the down payment in this illustration.

But that doesn’t mean it will automatically be cheaper.

You would still need to compare:

Interest rate
PMI
FHA mortgage insurance
Closing costs
Loan fees
Monthly payment
Total interest
Cash needed at closing

This is why the down payment alone isn’t enough to determine the total cost.

FHA vs Conventional Loan for First-Time Homebuyers

Both options can be relevant to first-time buyers.

FHA may be worth comparing if:

Your credit profile is weaker
You have limited cash for a down payment
You need more flexible qualification criteria
The property meets FHA requirements

Conventional may be worth comparing if:

You have stronger credit
You can make a larger down payment
You want to potentially reduce or eventually eliminate PMI
You qualify for competitive conventional pricing

These are comparison points, not guarantees. Actual loan offers can differ considerably between borrowers.

FHA vs Conventional Loan With a 580 Credit Score

A borrower with a 580 credit score may qualify for the FHA 3.5% minimum investment framework if other FHA and lender requirements are met.

For conventional financing, qualification depends on the specific lender and program.

If your credit score is around 580, don’t assume you have only one option.

Ask lenders for actual quotes for both FHA and conventional financing if you qualify for each.

Compare the Loan Estimates rather than relying on a general online calculator.

FHA vs Conventional Loan With 700+ Credit

A borrower with stronger credit may qualify for more competitive conventional pricing.

That doesn’t mean FHA automatically becomes a poor choice.

The comparison should include:

Interest rate
Mortgage insurance
Down payment
Closing costs
Monthly payment
Total loan cost

CFPB specifically notes that FHA can be more expensive for borrowers with good credit and a medium down payment, while FHA may be less expensive for borrowers with lower credit scores or smaller down payments.

FHA vs Conventional Loan: 5% Down

With 5% available for a down payment, you could potentially compare both options.

For a $300,000 home:

5% down = $15,000

At this point, the comparison should focus heavily on mortgage insurance and the interest rate offered.

A conventional loan may have PMI, while an FHA loan generally has FHA mortgage insurance.

Ask both lenders for official Loan Estimates so you can compare the actual numbers.

Can You Switch From FHA to Conventional Later?

A homeowner may potentially refinance an FHA mortgage into a conventional mortgage later if they qualify.

For example, a borrower might refinance after:

Building home equity
Improving credit
Increasing income
Reducing debt
Improving the loan-to-value ratio

But refinancing isn’t automatically beneficial.

You may have to pay closing costs and other fees, and the new interest rate and loan terms matter.

Always compare the total cost of refinancing with the potential savings.

FHA vs Conventional Loan: Which Costs Less?

There is no universal answer.

CFPB’s guidance is particularly useful here: conventional loans typically cost less than FHA loans overall but can be harder to qualify for. However, for borrowers with lower credit scores or smaller down payments, FHA can sometimes be less expensive.

Your actual offer matters more than the general rule.

Ask lenders to provide comparable Loan Estimates for:

FHA
Conventional

Then compare the same:

Purchase price
Loan amount
Loan term
Down payment
Interest-rate assumptions
Closing costs

How to Compare FHA and Conventional Offers

When you receive Loan Estimates, look at these sections carefully:

Interest rate

Compare the actual rate offered.

APR

APR can help you compare the broader cost of credit, although it should not be viewed as the only measure.

Monthly principal and interest

Check the basic mortgage payment.

Mortgage insurance

Compare FHA mortgage insurance with conventional PMI.

Upfront costs

Look at lender fees, mortgage insurance charges and other closing costs.

Cash to close

This tells you more than the down payment alone.

Total interest

Consider the long-term cost if you expect to keep the mortgage for many years.

CFPB recommends shopping around and comparing official Loan Estimates before choosing a mortgage.

Common FHA vs Conventional Mistakes

Mistake 1: Choosing based only on the down payment

A lower down payment doesn’t automatically mean a lower-cost mortgage.

Mistake 2: Looking only at the interest rate

Mortgage insurance and fees can significantly affect the overall cost.

Mistake 3: Assuming 20% down is always necessary for conventional

Some conventional programs allow substantially lower down payments.

Mistake 4: Assuming FHA is only for first-time buyers

FHA eligibility isn’t limited exclusively to first-time homebuyers.

Mistake 5: Assuming a credit score alone guarantees approval

Lenders also consider income, debts, credit history, property, documentation and other factors.

Mistake 6: Ignoring PMI cancellation rules

If you’re considering conventional financing with PMI, understand how and when PMI can be cancelled.

Mistake 7: Comparing different loan amounts

When comparing FHA and conventional offers, make sure you’re comparing equivalent loan amounts and terms.

FHA vs Conventional Loan Checklist

Before choosing a mortgage, compare:

Purchase price
Down payment
Credit score
Interest rate
APR
Monthly principal and interest
FHA mortgage insurance
Conventional PMI
Closing costs
Cash to close
Loan term
Loan limits
Property requirements
Prepayment considerations
Expected time in the home
Total borrowing cost

Frequently Asked Questions

Is FHA better than a conventional loan?

Neither loan is automatically better for every borrower. FHA can provide more flexible qualification options, while conventional financing may offer lower costs for some borrowers with stronger credit and larger down payments.

Is FHA cheaper than conventional?

It depends on the borrower. CFPB says conventional loans can be less expensive for borrowers with good credit and medium down payments, while FHA can sometimes be less expensive for borrowers with lower credit scores or smaller down payments.

What is the minimum down payment for FHA?

For qualifying borrowers, FHA financing can require as little as 3.5%. Borrowers with different credit profiles may have different minimum-investment requirements.

Can conventional loans have a 3% down payment?

Yes. Some conventional mortgage programs allow down payments as low as 3%, depending on borrower and program requirements.

Which has lower mortgage insurance, FHA or conventional?

It depends on the borrower. Conventional PMI pricing can vary based on factors including credit score and down payment, while FHA mortgage insurance follows FHA program rules.

Can I remove PMI from a conventional loan?

In many cases, yes. Federal rules provide for PMI cancellation under certain circumstances, including when the mortgage balance reaches a specified percentage of the home’s original value.

Does FHA mortgage insurance go away?

FHA mortgage insurance follows different rules from conventional PMI. Whether and when it ends depends on factors including the loan’s origination terms, down payment, and applicable FHA rules.

Can I buy a second home with an FHA loan?

Standard FHA financing is generally intended for owner-occupied primary residences. Conventional financing can offer options for second homes subject to program and lender requirements.

What credit score is needed for FHA vs conventional?

FHA has a framework that can allow qualifying borrowers with scores as low as 500, although the required investment changes and lenders may have additional requirements. Conventional credit requirements vary by program and lender.

Are FHA loans only for first-time homebuyers?

No. FHA loans are not exclusively limited to first-time buyers. Eligibility depends on the applicable FHA program requirements.

Final Takeaway

The FHA vs conventional loan decision comes down to your individual financial profile and the actual loan offers available to you.

FHA financing can be useful for borrowers who need a smaller down payment or more flexible credit requirements. Conventional financing can be attractive to borrowers with stronger credit, larger down payments, or a desire for conventional PMI that can potentially be cancelled under applicable rules.

Don’t choose based only on the minimum down payment.

Get comparable FHA and conventional Loan Estimates and compare the interest rate, mortgage insurance, closing costs, monthly payment, cash to close, and total borrowing cost.

That comparison will give you a much clearer picture of how each mortgage could affect your finances.

Why Maintain Market Is Different

Maintain Market focuses on making complicated financial decisions easier to understand without reducing them to a single “best” answer.

For mortgage comparisons, we look beyond the headline interest rate and down payment and explain the factors that can change the real cost of borrowing, including mortgage insurance, credit requirements, loan limits and closing costs.

References

Editorial Review

Reviewed for U.S. FHA and conventional mortgage terminology, down-payment rules, mortgage insurance, PMI, FHA loan limits conforming loan limits. Mortgage eligibility, rates, fees and lender requirements vary by borrower, property, location and lender. Readers should compare current Loan Estimates before choosing a mortgage.