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Choosing the right mortgage type can save you thousands of dollars over the life of your loan. Conventional, FHA, and VA loans each have distinct advantages depending on your credit score, down payment, military service, and financial situation. Here is a detailed comparison to help you decide.

Down Payment Comparison

Conventional loans require as little as 3% down for first-time buyers and 5% for repeat buyers. FHA loans require 3.5% down with a 580+ credit score. VA loans require zero down payment. For a $400,000 home, that is $12,000 (conventional 3%), $14,000 (FHA 3.5%), or $0 (VA). The down payment difference alone can make VA or FHA dramatically more accessible for buyers with limited savings.

Credit Score Requirements

Conventional loans require a minimum 620 FICO, with the best rates at 740+. FHA loans allow scores as low as 500 (with 10% down) or 580 (with 3.5% down). VA loans have no VA-mandated minimum, but most lenders require 620. If your credit score is below 680, FHA or VA will likely give you better terms than conventional. Above 720, conventional usually wins on total cost.

Mortgage Insurance

Conventional loans require PMI when LTV exceeds 80%, which drops off automatically at 78% LTV. FHA loans require upfront MIP (1.75%) plus annual MIP (0.55%) for the life of the loan with less than 10% down. VA loans have no mortgage insurance at all — just the one-time funding fee. The mortgage insurance difference is significant: on a $350,000 loan, FHA MIP costs about $160/month permanently, while conventional PMI at similar credit levels might be $100-150/month but goes away once you reach 20% equity.

Interest Rates

VA loans typically have the lowest rates, followed by conventional, then FHA. However, when you factor in FHA mortgage insurance, the effective rate (rate + MIP) often makes FHA the most expensive option for borrowers with good credit. The best way to compare: use Rate Direct to check your exact rate under each loan type. The rate difference between programs varies by credit score and LTV.

When to Choose Conventional

Choose conventional when your credit score is 700+, you can put at least 10% down (to minimize PMI), you want to buy an investment property or second home (FHA and VA are primary residence only), you want the flexibility to remove PMI once you build equity, or when your loan amount exceeds FHA limits.

When to Choose FHA

Choose FHA when your credit score is below 680 and you have less than 10% for a down payment, you have a recent bankruptcy or foreclosure (FHA waiting periods are shorter), your DTI is high (FHA allows up to 57% with compensating factors), or you are a first-time buyer who needs the most flexible qualification standards available.

When to Choose VA

If you are eligible for a VA loan, it is almost always the best choice for a primary residence purchase. Zero down payment, no PMI, lowest rates, and flexible DTI requirements make it the most favorable mortgage product available. The only scenario where conventional might beat VA is if you have a large down payment and want to avoid the VA funding fee.