Compare FHA and conventional loans side by side — down payment, credit score, mortgage insurance, and more. Find out which loan fits your situation in plain language.
You are ready to buy a home. You start reading about loan options. And two names keep coming up: FHA and conventional.
But what is the actual difference? And which one should you choose?
The short answer: it depends on your credit score, your down payment, and your overall financial picture. Neither one is "better" across the board. The right choice is the one that fits your situation.
Let me break both down in plain language.
An FHA loan is a mortgage backed by the Federal Housing Administration. The government does not lend you the money — it insures the loan. That insurance makes lenders more comfortable approving borrowers with lower credit scores or smaller down payments.
FHA loans are popular with first-time buyers because they are easier to qualify for.
A conventional loan is a mortgage that is not backed by the government. It follows guidelines set by Fannie Mae and Freddie Mac. Conventional loans usually need a higher credit score — but they come with important advantages, especially around mortgage insurance.
Here is a clear breakdown of how FHA and conventional loans stack up. Subject to credit approval. Programs, rates, and terms subject to change.
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | 3.5% (with 580+ credit) | 3% (with strong credit) |
| Minimum Credit Score | 580 for 3.5% down; 500–579 for 10% down | Typically 620+ (varies by lender) |
| Mortgage Insurance | Required for life of loan (MIP) | Required if less than 20% down (PMI); can be removed later |
| Upfront Insurance Fee | 1.75% of loan amount (can be rolled into loan) | None |
| Loan Limits (2026) | Set by county; may be lower in some areas | Higher limits; conforming + jumbo options |
| Property Standards | Must meet FHA safety and livability requirements | More flexible property guidelines |
| Waiting Period After Bankruptcy | 2 years (Chapter 7) | 4 years (Chapter 7) |
| Best For | Lower credit scores, smaller down payments, past credit challenges | Higher credit scores, buyers who want to drop insurance later |
An FHA loan might be the right fit if:
FHA loans require mortgage insurance premiums (MIP) for the entire life of the loan — unless you put 10% or more down, in which case MIP drops off after 11 years.
This is different from conventional loans, where you can remove insurance once you reach 20% equity.
A conventional loan might be the right fit if:
Yes. If you start with an FHA loan, you can refinance into a conventional loan later — once your credit improves or you build enough equity. Many homeowners do this specifically to drop their mortgage insurance payments.
We help people with refinance decisions like this all the time. It is part of staying with you after closing day.
Still not sure? Start here:
| Your Situation | Likely Best Fit |
|---|---|
| Credit score under 620 | FHA |
| Less than 5% saved for down payment | FHA |
| Credit score 620+ with 5%+ down | Conventional |
| Want to remove mortgage insurance later | Conventional |
| Past bankruptcy or foreclosure | FHA (shorter wait) |
| Buying a condo | Conventional (more flexible) |
| Eligible veteran or active military | VA loan (may be an even better option) |
That is completely normal. Most buyers do not know which program is right until they sit down with someone who can walk through the numbers.
That is what we do.
During a free planning session, we review your credit, income, savings, and goals. Then we show you which loan programs you qualify for — and help you pick the one that makes the most sense for your budget and your future.
We are a mortgage broker. That means we compare options from multiple lenders. You get more choices and a better chance of finding the right fit.
Questions in Spanish? No problem. We offer full bilingual service.
You do not have to figure this out alone. Let us sit down together — in person or by phone — and look at your numbers. We will help you choose the loan that fits. No pressure. No jargon. Just clarity.
Jexayra has spent 9 years guiding families through the mortgage process. She has helped over 50 families reach homeownership with an average close time of 21 days. Bilingual in English and Spanish, she believes every borrower deserves clarity, care, and excellence — siempre.
Learn more about Jexayra