FHA vs. Conventional Loan: Which is Right for You?
Detailed side-by-side comparison of requirements, costs, and benefits to help you choose the best mortgage path.
At a Glance Comparison
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Credit Score | 500-580+ | 620+ |
| Minimum Down Payment | 3.5% (with 580 score) | 3% (First-time buyers) |
| Mortgage Insurance (PMI/MIP) | Required for life of loan (usually) | Removable after 20% equity |
| Debt-to-Income (DTI) Ratio | Up to 57% allowed | Usually max 43-50% |
| Loan Limits (2025) | Lower ($498k - $1.15M) | Higher ($766k - $1.15M) |
| Property Use | Primary Residence Only | Primary, Second Home, Investment |
FHA Loan Deep Dive
Federal Housing Administration (FHA) loans are government-backed mortgages designed to help low-to-moderate income borrowers buy homes. They are famous for their lenient credit score requirements.
Pros
• Easier to qualify with low credit
• Low down payment (3.5%)
• Higher DTI ratios accepted
• Assumable mortgages
Cons
• Mortgage insurance (MIP) is permanent
• Upfront MIP fee (1.75%)
• Strict property appraisals
• Primary residence only
Conventional Loan Deep Dive
Conventional loans are not insured by the government. They are offered by private lenders and usually sold to Fannie Mae or Freddie Mac. They reward borrowers with good credit.
Pros
• No mortgage insurance with 20% down
• PMI is cancellable
• Flexible terms (10, 15, 20, 30 years)
• Investment properties allowed
Cons
• Harder to qualify (620+ credit)
• Higher rates for low credit scores
• Stricter DTI limits
• Higher down payment for some
Which Should You Choose?
Choose FHA if:
- Your credit score is below 620.
- You have a high debt-to-income ratio (above 43%).
- You have a small down payment and low credit.
- You plan to move or refinance before the permanent mortgage insurance becomes too costly.
Choose Conventional if:
- Your credit score is 700 or higher (you'll get better rates).
- You can put down 20% to avoid insurance entirely.
- You plan to stay in the home long-term and cancel PMI later.
- You are buying a second home or investment property.
Run the Numbers
Financial Editorial Team
Mortgage Specialists
Our editorial team consists of mortgage professionals and financial analysts dedicated to helping you navigate the home buying process.