FHA loans

FHA vs conventional: how to compare the two for your file

FHA and conventional loans can both work with a small down payment. They differ most in how mortgage insurance is priced and when it ends, in how much your credit score matters, and in how strict they are about the property. Compare them on your own numbers, not on reputation.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

For a buyer with a small down payment, the choice is usually between an FHA loan and a conventional loan with private mortgage insurance. Both can work. The better one for you depends mostly on your credit score, your down payment and how long you will keep the loan.

The differences at a glance

Feature	FHA	Conventional
Minimum down payment	3.5% for borrowers who meet FHA's score standard	3% for eligible buyers in certain programs
Upfront mortgage insurance	1.75% of the base loan, usually financed	None for standard borrower-paid PMI
Annual mortgage insurance	0.55% or 0.50% of the loan for most loans	PMI priced by credit score and down payment
How long it lasts	Life of the loan below 10% down; 11 years at 10% or more	Can be canceled at 80% of original value; ends at 78%
2026 loan limit, one unit	$541,287 to $1,249,125 by county	$832,750 baseline, higher in high-cost areas
Property standards	HUD minimum property requirements, checked by the appraiser	Lender and appraisal standards

The FHA figures come from HUD Mortgagee Letter 2023-05 and HUD's 2026 limits. The conventional figures come from Fannie Mae and FHFA. The PMI rules are federal and summarized by the CFPB.

Why mortgage insurance usually decides it

FHA charges everyone the same annual premium rate for a given loan size and loan-to-value ratio. Your credit score does not change it. That is why FHA often helps buyers with lower scores. Conventional PMI is priced by risk, so a strong score can make it cheaper than FHA's premium, and a weak score can make it much more expensive.

Duration matters just as much. With less than 10 percent down, HUD's current rules keep FHA's annual premium for the life of the loan. Conventional PMI, under federal law, can be canceled on request when the balance is scheduled to reach 80 percent of the original value, ends automatically at 78 percent, and ends at the loan's midpoint at the latest. Over ten years or more, that difference adds up.

Credit and debt

FHA's minimum decision credit scores are lower than what most conventional loans accept. Fannie Mae requires 620 for most manually underwritten fixed-rate loans and has no fixed minimum for loans it approves through Desktop Underwriter, but its pricing rewards higher scores. FHA's debt-to-income standards can also be more forgiving in some cases. If your score is modest or your ratios are tight, ask for both quotes.

Property and limits

An FHA appraisal checks the home against HUD's minimum property requirements. If the appraiser finds safety or soundness problems, they must be repaired before closing. Conventional appraisals focus on value and marketability. A home that needs work may be easier to finance with a conventional loan or a renovation program.

Both have county loan limits. FHA's 2026 one-unit limit runs from $541,287 in lower-cost areas to $1,249,125 in high-cost areas. The 2026 conforming limit is $832,750 in most places. In some areas FHA's limit is lower than the conforming limit, so check both for your county.

How to compare

Get both Loan Estimates from the same lender, on the same day, for the same price. Compare the monthly payment, the cash to close and the "In 5 Years" figure on page 3. Then think about the long run. If you expect to keep the loan for many years and your credit is good, conventional PMI's end date may decide it. If your credit is fair and you expect to refinance anyway, FHA's pricing may win.

The bottom line

Do not choose by reputation. Get both quotes on your own numbers, look at the mortgage insurance rate and how long it lasts, and run the calculator to see the FHA premium on your price.

Mini calculator: FHA mortgage insurance

Upfront premium of 1.75% plus the annual premium for a loan term over 15 years with a base amount up to $726,200, using the rates in HUD Mortgagee Letter 2023-05.

Purchase price ($)

Down payment (% of price)

Enter your figures to see the result. Nothing you type leaves this page.

Simplified: assumes the appraised value equals the price and a term over 15 years. Loans over $726,200 and terms of 15 years or less use different rates.

Comparing FHA and conventional quotes

Ask one lender for an FHA and a conventional Loan Estimate on the same price and down payment.
Compare the rate, the monthly mortgage insurance and the upfront mortgage insurance on each.
Note how long each mortgage insurance lasts.
Compare the cash to close.
Check that the loan amount is within the FHA limit and the conforming limit for the county.
Decide how long you expect to keep the loan before refinancing or selling.

Questions buyers ask

Is FHA cheaper than conventional?

It depends on your credit and down payment. FHA pricing is less sensitive to credit scores, so it often helps buyers with lower scores. Buyers with strong scores often pay less overall with conventional, partly because PMI can end.

Does FHA mortgage insurance ever end?

With less than 10 percent down, HUD's current rules keep the annual premium for the life of the loan. With 10 percent or more down, it lasts 11 years. Refinancing into a different loan is the other way out.

What is the minimum down payment for each?

Conventional loans start at 3 percent down for eligible buyers under Fannie Mae and Freddie Mac programs. FHA requires at least 3.5 percent for borrowers who meet its credit score standard.

Can I switch from FHA to conventional later?

Yes, by refinancing once you have more equity or better credit, but a refinance has its own closing costs and depends on rates at the time.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.