FHA vs Conventional Loans: Which Is Right for You?

Q: Can I switch from an FHA loan to a conventional loan later?

Yes. Many homeowners refinance from FHA to conventional once they build enough equity (typically 20%) or improve their credit score. This eliminates the annual MIP and can lower your monthly payment.

Q: Is FHA mortgage insurance more expensive than conventional PMI?

It depends. FHA MIP has a 1.75% upfront premium plus 0.55% annually. Conventional PMI rates range from 0.2% to 1.5% depending on credit score and LTV. For borrowers with 720+ credit, conventional PMI is usually cheaper. For borrowers under 680, FHA MIP may cost less.

Q: Do FHA loans take longer to close than conventional loans?

FHA loans can take slightly longer due to stricter appraisal requirements. Average FHA closing is 45–50 days vs. 30–45 days for conventional. However, with a prepared lender like NetCORE Lending, we streamline the process to minimize delays.

Q: Can I use gift funds for a down payment on both loan types?

Yes. Both FHA and conventional loans allow gift funds for the down payment. FHA loans allow 100% of the down payment to come from gift funds. Conventional loans may require you to contribute a portion from your own funds if your down payment is less than 20%.

Q: Which loan type has lower closing costs?

Closing costs are similar for both loan types, typically 2%–5% of the loan amount. However, FHA loans have the additional 1.75% upfront MIP. FHA also allows sellers to contribute up to 6% toward closing costs (vs. 3%–9% for conventional depending on down payment).

Two of the most popular mortgage options in America — but which one saves you more money? We break down every key difference so you can choose with confidence.

Quick Answer

FHA loans are ideal for borrowers with credit scores 580–619 or limited savings. Conventional loans offer lower costs for borrowers with 680+ credit and 10%+ down.

SIDE-BY-SIDE

FHA vs Conventional at a Glance

Feature

FHA Loan

Conventional Loan

FeatureMinimum Credit Score

FHA Loan580 (3.5% down); 500 (10% down)

Conventional Loan620 minimum; best rates at 740+

FeatureDown Payment

FHA Loan3.5% minimum

Conventional Loan3% minimum (first-time buyers); 5%+ typical

FeatureMortgage Insurance

FHA LoanMIP: 1.75% upfront + 0.55%/yr annual — required for life of loan if down payment < 10%

Conventional LoanPMI: 0.2%–1.5%/yr — removable once you reach 80% LTV

FeatureLoan Limits (2024)

FHA Loan$498,257 standard; up to $1,149,825 in high-cost areas

Conventional Loan$766,550 standard; up to $1,149,825 in high-cost areas

FeatureDTI Ratio

FHA LoanUp to 57% with compensating factors

Conventional LoanTypically 45%; up to 50% with strong reserves

FeatureProperty Types

FHA Loan1–4 units; must be primary residence

Conventional Loan1–4 units; primary, second home, or investment property

FeatureAppraisal Standards

FHA LoanStricter HUD/FHA property standards

Conventional LoanStandard appraisal; appraisal waivers possible

FeatureBest For

FHA LoanLower credit scores, first-time buyers, limited savings

Conventional LoanHigher credit scores, those wanting to avoid long-term mortgage insurance

DECISION GUIDE

Which Should You Choose?

Choose FHA If You...

✓Have a credit score between 580 and 679
✓Can only put 3.5% down
✓Have a higher debt-to-income ratio
✓Are a first-time homebuyer with limited savings
✓Had a bankruptcy or foreclosure in the past 2–3 years

Choose Conventional If You...

✓Have a credit score of 680 or higher
✓Can put 10–20% down to avoid or remove PMI
✓Want to buy a second home or investment property
✓Prefer lower long-term mortgage insurance costs
✓Want the option to get an appraisal waiver

FAQ

Frequently Asked Questions

Yes. Many homeowners refinance from FHA to conventional once they build enough equity (typically 20%) or improve their credit score. This eliminates the annual MIP and can lower your monthly payment.

It depends. FHA MIP has a 1.75% upfront premium plus 0.55% annually. Conventional PMI rates range from 0.2% to 1.5% depending on credit score and LTV. For borrowers with 720+ credit, conventional PMI is usually cheaper. For borrowers under 680, FHA MIP may cost less.

FHA loans can take slightly longer due to stricter appraisal requirements. Average FHA closing is 45–50 days vs. 30–45 days for conventional. However, with a prepared lender like NetCORE Lending, we streamline the process to minimize delays.

Yes. Both FHA and conventional loans allow gift funds for the down payment. FHA loans allow 100% of the down payment to come from gift funds. Conventional loans may require you to contribute a portion from your own funds if your down payment is less than 20%.

Closing costs are similar for both loan types, typically 2%–5% of the loan amount. However, FHA loans have the additional 1.75% upfront MIP. FHA also allows sellers to contribute up to 6% toward closing costs (vs. 3%–9% for conventional depending on down payment).

Still Not Sure? Let Us Help You Decide

Our loan officers compare both options using your actual financial profile — credit score, savings, DTI, and goals — to recommend the best fit.

Get Pre-Qualified Learn About FHA Loans Learn About Conventional

This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Rates, terms, and availability of programs are subject to change without notice.

Reviewed by Joann Ton, Loan Officer (NMLS# 1461031) | Last updated: June 2026

NMLS# 1484338Equal Housing Lender

FHA vs Conventional Loans: Which Is Right for You?

Two of the most popular mortgage options in America — but which one saves you more money? We break down every key difference so you can choose with confidence.

Quick Answer

FHA loans are ideal for borrowers with credit scores 580–619 or limited savings. Conventional loans offer lower costs for borrowers with 680+ credit and 10%+ down.

SIDE-BY-SIDE

FHA vs Conventional at a Glance

Feature

FHA Loan

Conventional Loan

FeatureMinimum Credit Score

FHA Loan580 (3.5% down); 500 (10% down)

Conventional Loan620 minimum; best rates at 740+

FeatureDown Payment

FHA Loan3.5% minimum

Conventional Loan3% minimum (first-time buyers); 5%+ typical

FeatureMortgage Insurance

FHA LoanMIP: 1.75% upfront + 0.55%/yr annual — required for life of loan if down payment < 10%

Conventional LoanPMI: 0.2%–1.5%/yr — removable once you reach 80% LTV

FeatureLoan Limits (2024)

FHA Loan$498,257 standard; up to $1,149,825 in high-cost areas

Conventional Loan$766,550 standard; up to $1,149,825 in high-cost areas

FeatureDTI Ratio

FHA LoanUp to 57% with compensating factors

Conventional LoanTypically 45%; up to 50% with strong reserves

FeatureProperty Types

FHA Loan1–4 units; must be primary residence

Conventional Loan1–4 units; primary, second home, or investment property

FeatureAppraisal Standards

FHA LoanStricter HUD/FHA property standards

Conventional LoanStandard appraisal; appraisal waivers possible

FeatureBest For

FHA LoanLower credit scores, first-time buyers, limited savings

Conventional LoanHigher credit scores, those wanting to avoid long-term mortgage insurance

DECISION GUIDE

Which Should You Choose?

Choose FHA If You...

✓Have a credit score between 580 and 679
✓Can only put 3.5% down
✓Have a higher debt-to-income ratio
✓Are a first-time homebuyer with limited savings
✓Had a bankruptcy or foreclosure in the past 2–3 years

Choose Conventional If You...

✓Have a credit score of 680 or higher
✓Can put 10–20% down to avoid or remove PMI
✓Want to buy a second home or investment property
✓Prefer lower long-term mortgage insurance costs
✓Want the option to get an appraisal waiver

FAQ

Frequently Asked Questions

Yes. Many homeowners refinance from FHA to conventional once they build enough equity (typically 20%) or improve their credit score. This eliminates the annual MIP and can lower your monthly payment.

Still Not Sure? Let Us Help You Decide

Our loan officers compare both options using your actual financial profile — credit score, savings, DTI, and goals — to recommend the best fit.

Get Pre-Qualified Learn About FHA Loans Learn About Conventional

This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Rates, terms, and availability of programs are subject to change without notice.

Reviewed by Joann Ton, Loan Officer (NMLS# 1461031) | Last updated: June 2026

NMLS# 1484338Equal Housing Lender