Guide · United States
FHA vs Conventional Loans: Which Mortgage Is Right for You in 2026?
Last updated 2026-07-12 · Published 2026-07-12
Compare FHA and conventional mortgage requirements—down payment, credit score, mortgage insurance, and loan limits—then model your payment in our free US mortgage calculator.
The core difference
An FHA loan is insured by the Federal Housing Administration and is designed to make homeownership accessible with lower credit score and down payment requirements. A conventional loan is not government-insured; it either meets Fannie Mae/Freddie Mac guidelines (conforming) or does not (non-conforming/jumbo), and typically rewards stronger credit profiles with better pricing.
Neither is universally "better"—the right choice depends heavily on your credit score, available down payment, debt-to-income ratio, and how long you plan to keep the loan before refinancing or selling.
Down payment and credit score requirements
FHA loans allow down payments as low as 3.5% for borrowers with a credit score at or above the FHA's minimum qualifying threshold, dropping to a higher minimum down payment for scores below that line. Conventional loans can go as low as 3% down for qualifying first-time buyers on certain programs, but generally require a stronger credit profile to access the best rates and to avoid overlays that lenders add on top of baseline guidelines.
In practice, borrowers with limited credit history or a few dings tend to qualify more easily through FHA, while borrowers with strong credit (typically well into the 700s) often get better overall pricing—including mortgage insurance costs—through conventional.
Mortgage insurance: the biggest long-run cost difference
FHA loans require an upfront mortgage insurance premium (MIP) financed into the loan, plus an annual MIP paid monthly. Critically, on FHA loans with a down payment below 10%, that annual MIP typically lasts for the life of the loan—it does not automatically cancel once you reach 20% equity, unlike conventional private mortgage insurance (PMI).
Conventional loans only require PMI when your down payment is below 20%, and PMI can be cancelled once your loan balance reaches 80% of the original home value (and must be automatically terminated by the lender at 78%, under federal law, if payments are current). For a borrower who expects to build equity and stay in the loan long-term, this difference alone can make conventional meaningfully cheaper over time despite FHA's easier upfront qualification.
Loan limits and property requirements
Both FHA and conforming conventional loans have county-specific loan limits set annually, with higher limits in expensive metro areas. FHA also requires the property to meet specific minimum safety and habitability standards via an FHA appraisal, which can occasionally complicate purchases of older or fixer-upper homes; conventional appraisals are generally less restrictive on property condition.
If you are considering a higher-priced home above conforming limits, you would be looking at a jumbo loan rather than either standard FHA or conforming conventional—a separate category with its own underwriting standards.
Worked example (illustrative numbers only)
On a $350,000 home with 5% down ($17,500), an FHA loan of $332,500 carries an upfront MIP financed into the balance plus an ongoing monthly MIP for the life of the loan. The same purchase through a conventional 5%-down loan carries monthly PMI that can be cancelled once equity reaches 20%, at which point the payment drops.
Use our US mortgage calculator to compare the monthly principal-and-interest payment for both loan types at their respective rates, then layer in the mortgage insurance difference manually to see the full multi-year cost gap.
Try the numbers yourself
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Go to calculator →Frequently asked questions
Can I refinance from FHA to conventional later to drop mortgage insurance?
Yes, many borrowers refinance out of FHA into a conventional loan once they have built enough equity, specifically to eliminate life-of-loan MIP. Refinancing has its own closing costs, so run the breakeven math before committing.
Is the 28/36 rule applied the same way for FHA and conventional?
The general debt-to-income framework is similar in concept, but FHA underwriting guidelines and individual conventional lender overlays can allow different maximum DTI ratios depending on compensating factors like credit score and cash reserves. See our 28/36 rule guide for the underlying framework.
Does a lower credit score always mean FHA is cheaper?
Not always. FHA's mortgage insurance is fixed by program rules regardless of credit score, while conventional PMI pricing varies with credit score—so a borrower with a middling score might still find total FHA and conventional costs closer than expected. Get quotes for both and compare the full APR, not just the headline rate.
Is this guide a substitute for pre-approval?
No. Only a licensed mortgage lender can confirm your actual rate, mortgage insurance cost, and eligibility after reviewing your full credit and income file.
Educational content only—not mortgage, tax, or legal advice. Confirm any decision with a licensed professional in your jurisdiction.