Choosing the right loan program is just as important as finding the right house. The two most popular options—FHA (Federal Housing Administration) and Conventional loans—serve different types of buyers.
Key Differences at a Glance
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Credit Score | 580 (for 3.5% down) | 620 (standard) |
| Minimum Down Payment | 3.5% | 3% (first-time buyers) |
| Mortgage Insurance | MIP (Upfront + Monthly) | PMI (Monthly only) |
| Insurance Removal | Permanent (for most) | Cancellable at 20% equity |
| Appraisal Standards | Stricter (safety checks) | Standard (value check) |
The Case for FHA Loans
FHA loans are government-backed, making them safer for lenders and easier for you to qualify.
Pros:
- You can qualify with a credit score as low as 580 (or even 500 with 10% down).
- DTI (Debt-to-Income) ratios can go higher, sometimes up to 55%.
Cons:
- You must pay an Upfront Mortgage Insurance Premium (1.75% of the loan) added to your balance.
- The monthly insurance usually lasts for the life of the loan.
The Case for Conventional Loans
Backed by Fannie Mae or Freddie Mac, these are the standard for borrowers with good credit (680+).
Pros:
- No upfront insurance fee.
- PMI is often cheaper for high-credit borrowers and falls off automatically once you build 20% equity.
Cons:
- Harder to qualify.
- Interest rates may be slightly higher if your credit score is below 700.
Which Payment is Lower?
Often, FHA loans have lower interest rates, but the expensive mortgage insurance can make the monthly payment higher. To see the real difference, you should compare FHA and conventional payments side-by-side to see which one leaves more cash in your pocket each month.
Calculate Your Payments
Use our mortgage calculator to compare FHA vs. Conventional loan payments. Enter your loan amount, interest rate, and see how mortgage insurance affects your monthly payment.
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