FHA or conventional?
How the two compare
| FHA | Conventional | |
|---|---|---|
| Monthly payment with a small down payment | Lower in our example | Higher in our example, most of all at lower scores |
| Mortgage insurance each year | For this 30-year example, 0.50% or 0.55% of the loan, the same for every score | Depends on your score: much higher at lower scores, lowest from 760 |
| When the insurance ends | Usually never, with less than 10% down. Only a refinance removes it. | On its own, as you pay the loan down |
| One-time costs | A 1.75% upfront insurance premium, added to the loan ($6,650 on the current example) | A loan-level price adjustment (LLPA) in the lender’s pricing, largest at lower scores; passed on through points, credits or the rate |
| With 20% down | Still charges insurance | No mortgage insurance at all |
| Lowest score | 580 with 3.5% down at most lenders | 620 at most lenders |
| Home and loan rules | Home you live in only; lower loan limits in many counties; stricter appraisal; condos must be FHA-approved | Homes you live in, second homes and rentals; higher loan limits |
When each is worth asking about
- FHAMay be worth pricing when your score is below about 680 and your down payment is small.
- ConventionalMay be worth pricing when you can put 20% down, or your score is high and you expect to stay long enough for the insurance to end.
- ConventionalUsually the option for a second home, a rental, or a condo that is not FHA-approved.
- BothNot sure? Ask your loan officer to price both and compare the monthly payment now, the total over the years you expect to keep the home, and when each loan’s insurance ends.
If FHA fits today
Some buyers start with FHA and later refinance to conventional once their score and equity rise, which removes the FHA insurance. A refinance has its own costs. Ask your loan officer what would have to be true for it to make sense for you.
Notes and sources
- HUD mortgage insurance schedule; Fannie Mae Loan-Level Price Adjustment Matrix (9 September 2026); Enact mortgage insurance card (updated 17 July 2025). Loan limits and property rules vary by county and lender.