FHA vs Conventional Mortgage
FHA and conventional are the two dominant first-mortgage products in the US. FHA is government-backed and more flexible on credit and down payment; conventional is the standard market product with lower long-term cost when you have strong credit and 5%+ down. The right choice usually comes down to FICO, down payment, and how long you plan to stay in the home.
FHA Mortgage
Government-backed loan with low down payment and flexible credit.
Best for: First-time buyers with sub-700 FICO or down payment under 5%.
Pros
- +3.5% down payment with 580+ FICO
- +500–579 FICO accepted with 10% down
- +Flexible DTI and credit event seasoning
- +Assumable by future buyers
Cons
- −Mortgage Insurance Premium (MIP) for life of loan if down < 10%
- −County loan limits
- −Property must meet FHA appraisal standards
Conventional Mortgage
Fannie/Freddie standard mortgage with lower long-term cost at strong credit.
Best for: Buyers with 680+ FICO or 20%+ down payment.
Pros
- +3% down available (HomeReady/Home Possible)
- +PMI removable at 20% equity
- +Higher loan limits than FHA in most counties
- +Standard appraisal
Cons
- −Higher rate at low FICO
- −Stricter DTI (45–50% cap)
- −PMI required below 20% down
| Field | FHA Mortgage | Conventional Mortgage |
|---|---|---|
| Min FICO | 580+ (500+ with 10% down) | 620+ (680+ for best pricing) |
| LTV (purchase) | Up to 96.5% | Up to 97% |
| LTV (cash-out) | Up to 80% | Up to 80% |
| Income docs | Standard income docs | Standard income docs |
| Term | 30-year fixed (15-year option) | 30-year fixed, 15-year, ARM |
| Time to close | 30–45 days | 30–45 days |
Which one should you choose?
- FHA Mortgage: choose FHA if your FICO is below 680, or if you have less than 5% down, or if you have a recent credit event.
- Conventional Mortgage: choose conventional if your FICO is 700+ and you can put 5%+ down. Lower long-term cost because PMI drops off.
- For 680–700 FICO with 5–10% down, run both — exact pricing and MI cost decide.
Frequently asked questions
Can I refinance FHA into conventional later?
Yes — once you have 20% equity, refinancing into conventional drops MIP entirely. This is the most common path for FHA borrowers.
Is FHA limited to first-time buyers?
No. FHA is open to repeat buyers, but the property must be a primary residence (not second home or investment).
What's the FHA MIP cost?
Upfront MIP is 1.75% of loan amount (financed). Annual MIP is 0.55% of loan balance, paid monthly, for the life of the loan if down payment is below 10%.
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Today's mortgage rates
Conventional
6.250%
6.288% APR
FHA
5.750%
5.780% APR
VA
5.750%
5.780% APR
Conv: 80% LTV, 780 FICO. FHA: 96.5% LTV, 680 FICO. VA: 100% LTV, 680 FICO. 30-yr fixed. Your rate may vary.