The FHA vs. conventional loan decision is one of the most important choices a first-time buyer makes, and getting it wrong costs money. The right answer depends on your credit score, down payment amount, and how long you plan to stay in the home.
Compare FHA and conventional lenders side-by-side: Get quotes for both loan types on LendingTree — actual rate differences vary by lender and borrower profile.
Quick Comparison: FHA vs. Conventional
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Min. Credit Score | 580 (3.5% down) / 500 (10% down) | 620 (most lenders) |
| Min. Down Payment | 3.5% | 3% (some programs) |
| Mortgage Insurance | Required for life of loan (if <10% down) | Required until 20% equity; can be removed |
| Loan Limits (2026) | $524,225 (standard) / up to $1,209,750 (high-cost) | $806,500 (standard conforming) |
| DTI Limit | Up to 57% (with compensating factors) | Up to 45–50% (varies by lender) |
| Property Standards | Stricter (FHA appraisal required) | Standard appraisal |
Mortgage Insurance: The Biggest Cost Difference
FHA mortgage insurance is the largest long-term cost difference between these loan types.
FHA loans require two types of mortgage insurance:
- Upfront MIP: 1.75% of the loan amount added to your loan balance at closing. On a $300,000 loan, that is $5,250.
- Annual MIP: 0.55% of the outstanding loan balance per year for most 30-year loans with less than 10% down. This is paid monthly as part of your mortgage payment.
If you put less than 10% down on an FHA loan, you pay annual MIP for the entire life of the loan — 30 years. The only way to eliminate it is to refinance into a conventional loan after you reach 20% equity.
Conventional loans require PMI when you put down less than 20%, but PMI can be canceled. Once your loan-to-value ratio reaches 80%, you can request removal. At 78% LTV, the lender must remove it automatically under federal law.
When FHA Wins
FHA is typically the better choice when:
- Your credit score is below 660
- Your debt-to-income ratio is above 45%
- You have had a recent bankruptcy, foreclosure, or collections (FHA has shorter waiting periods)
- You have limited savings and cannot put down more than 3.5%
See our full FHA loan requirements guide for complete eligibility details.
When Conventional Wins
Conventional is typically the better choice when:
- Your credit score is 720 or higher (PMI rates drop significantly at higher scores)
- You can put down 10% or more (PMI is temporary and cheaper than FHA MIP)
- You plan to stay in the home long enough to build 20% equity and cancel PMI
- You are buying a higher-priced home above FHA loan limits
- The property needs repairs that would fail an FHA appraisal
The Credit Score Crossover Point
At a 620 credit score, FHA rates are often competitive with conventional. At 680+, conventional rates and PMI costs often make it the cheaper monthly option. At 740+, conventional is almost always cheaper when you factor in the elimination of lifetime MIP.
The math varies by lender. The best approach is to request quotes for both loan types with the same down payment and compare the total monthly cost including mortgage insurance.
Lender Comparison
| Lender | Est. Rate Range | Min Credit Score | Min Down Payment | Best For |
|---|---|---|---|---|
| LendingTree | Varies by lender | 580 (FHA) / 620 (conv.) | 3.5% (FHA) / 3% (conv.) | Comparing multiple offers at once |
| Rocket Mortgage | Competitive market rates | 580 (FHA) / 620 (conv.) | 3.5% (FHA) / 1% (ONE+ program) | Fast digital approval process |
| Better.com | Competitive market rates | 620 | 3% | Low-fee online experience |
| New American Funding | Competitive market rates | 500 (FHA) / 620 (conv.) | 3.5% (FHA) / 3% (conv.) | Buyers with lower credit scores |
Bottom Line
FHA loans are the right choice for buyers with lower credit scores or higher debt loads. Conventional loans are better for buyers with strong credit who want to avoid long-term mortgage insurance costs. Compare both loan types before committing.
Compare FHA and conventional quotes on LendingTree — the right choice becomes obvious once you see the actual numbers side by side.
Also see: Full loan type comparison: FHA vs. conventional vs. VA vs. USDA