Side-by-Side Comparison
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Credit Score | 580 (500 with 10% down) | 620 |
| Minimum Down Payment | 3.5% | 3% (first-time buyers) |
| Mortgage Insurance | Upfront MIP (1.75%) + annual MIP for life of loan | PMI required below 20% down; removable at 80% LTV |
| Loan Limits (2026) | $498,257 (baseline) | $766,550 (conforming) |
| Property Requirements | Stricter FHA appraisal with HUD minimum property standards | Standard appraisal focused on market value |
| Max DTI Ratio | Up to 57% | Up to 50% |
Minimum Credit Score
FHA
580 (500 with 10% down)
Conventional
620
Minimum Down Payment
FHA
3.5%
Conventional
3% (first-time buyers)
Mortgage Insurance
FHA
Upfront MIP (1.75%) + annual MIP for life of loan
Conventional
PMI required below 20% down; removable at 80% LTV
Loan Limits (2026)
FHA
$498,257 (baseline)
Conventional
$766,550 (conforming)
Property Requirements
FHA
Stricter FHA appraisal with HUD minimum property standards
Conventional
Standard appraisal focused on market value
Max DTI Ratio
FHA
Up to 57%
Conventional
Up to 50%
When to Choose FHA
An FHA loan may be the better choice if your financial profile matches these scenarios:
Lower Credit Score
If your credit score is between 580 and 619, FHA is likely your best path to homeownership. You can even qualify with a score as low as 500 if you can put 10% down.
Smaller Down Payment
With just 3.5% down, FHA loans make it easier to get into a home sooner. Down payment funds can also come from gifts, grants, or assistance programs.
Higher Debt-to-Income Ratio
FHA loans allow DTI ratios up to 57%, giving you more flexibility if you carry student loans, car payments, or other monthly obligations.
Recent Credit Events
FHA loans have shorter waiting periods after bankruptcy or foreclosure compared to conventional loans, helping you rebuild sooner.
When to Choose Conventional
A conventional loan may be the better choice if your financial profile matches these scenarios:
Good Credit Score
With a credit score of 700 or higher, you'll likely qualify for competitive conventional rates that may beat FHA rates once you factor in mortgage insurance costs.
Want PMI Removed
Unlike FHA's lifetime MIP, conventional PMI can be canceled once you reach 80% loan-to-value, reducing your monthly payment over time and saving you thousands.
Investment or Second Home
FHA loans are restricted to primary residences. If you're purchasing a second home, vacation property, or investment property, a conventional loan is your option.
Higher Loan Amount
With conforming loan limits up to $766,550 in 2026, conventional loans let you finance more expensive properties without needing a jumbo loan.
Frequently Asked Questions
Can I switch from an FHA loan to a conventional loan?
Yes, you can refinance from an FHA loan to a conventional loan once you have at least 20% equity in your home. This is a common strategy to eliminate mortgage insurance payments, since FHA MIP lasts for the life of the loan while conventional PMI can be removed at 80% LTV.
Which loan type has lower monthly payments?
It depends on your financial profile. FHA loans often have lower interest rates, but the required mortgage insurance premium (MIP) can make monthly payments higher overall. Conventional loans may have slightly higher rates for borrowers with lower credit scores, but borrowers with strong credit (740+) typically get better rates and can avoid or eventually remove PMI.
Can I use an FHA or conventional loan for an investment property?
FHA loans are limited to primary residences only. Conventional loans can be used for primary residences, second homes, and investment properties, making them the more versatile option if you plan to purchase rental or investment properties.
Do FHA loans take longer to close than conventional loans?
FHA loans can sometimes take slightly longer to close due to stricter appraisal requirements and additional documentation. The FHA appraisal process evaluates both the home's value and its compliance with HUD minimum property standards, which can occasionally require repairs before closing.
Is it harder to get approved for a conventional loan?
Conventional loans generally have stricter qualification requirements, including a higher minimum credit score (620 vs 580) and lower maximum DTI ratio (50% vs 57%). However, borrowers who meet these requirements often benefit from more favorable terms, lower overall costs, and greater flexibility.