FHA vs Conventional Loans

The two most common mortgage types differ mainly in down payment, credit requirements and mortgage insurance. Here is a straight comparison.

FHA loans

Backed by the Federal Housing Administration, FHA loans let you buy with as little as 3.5% down and a credit score in the 500s. The trade-off is mortgage insurance that lasts the life of the loan in most cases, plus an upfront premium.

Conventional loans

Conventional loans (Fannie Mae and Freddie Mac) usually need 3-20% down and a higher credit score. But private mortgage insurance (PMI) drops automatically once you reach 20% equity.

Head to head

• Down payment: FHA 3.5% vs conventional 3-20%.
• Credit: FHA more lenient.
• Insurance: FHA for life vs conventional drops at 20%.
• Cost: Conventional is usually cheaper for strong borrowers.

Which to pick

If you have a solid credit score and 5% or more down, conventional usually wins. If your credit is thin, FHA gets you in the door. Model both on our calculator — PMI is a real line item in your PITI.