Side-by-Side Guide 15-minute read

FHA vs Conventional Mortgages:
which loan wins for you?

FHA loans were built to help lower-credit and first-time buyers. Conventional loans offer flexibility and lower lifetime costs for stronger borrowers. This guide unpacks credit requirements, down payments, PMI, rates, limits, and when to use each.

1) Quick snapshot

FHA

Min credit: 580 (3.5% down), 500 (10% down)
Low down payment (3.5%)
Upfront MIP + monthly insurance for life (if <10% down)
More lenient on debt-to-income (DTI)

Conventional

Min credit: ~620
Down payments from 3% (first-time) or 5%+
PMI drops at 80% LTV (no lifetime MI)
Better long-term cost if credit is solid

2) Side-by-side comparison

Feature	FHA	Conventional
Min credit	580 (3.5% down)	~620+
Down payment	3.5%+	3% (first-time) / 5%+
Loan limits	Lower (by county, often less than conventional)	Higher (FHFA conforming limits)
Mortgage Insurance	Upfront MIP + monthly, often lifetime	PMI drops at 80% LTV or auto at 78%
DTI tolerance	Up to ~57%	Typically capped ~45%
Rates	Usually lower base rate	Credit-dependent; can beat FHA if 700+
Best for	Lower credit, thin savings, first-time	Stronger credit/income, long-term hold

3) Pros & cons

FHA Pros

Easier credit + DTI thresholds
Lower down payments
Streamline refinance option

FHA Cons

Lifetime mortgage insurance (if <10% down)
Lower loan limits
Property standards stricter (appraisal)

Conventional Pros

No lifetime PMI—can cancel
Higher loan limits
Potentially cheaper long-term

Conventional Cons

Tighter credit/income requirements
Rates higher if <700 credit
Less forgiving on debt ratios

4) Which loan should you choose?

It comes down to credit profile, down payment size, and how long you’ll hold the loan.

FHA wins if:

Credit score is <680
You need 3.5% down
Higher DTI ratios

Conventional wins if:

Credit score is 700+
5–20% down available
Plan to hold long-term (avoid lifetime MI)

5) FAQs

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