FHA vs. Conventional Loans: Which Is Right for You?

Choosing between an FHA and conventional loan is one of the first decisions you'll make when buying a home. Here's a detailed comparison.

FHA Loans at a Glance

FHA loans are government-backed mortgages designed to help more Americans become homeowners.

Pros

• Lower down payment (3.5% with 580+ credit)
• More forgiving credit requirements
• Can qualify with higher DTI ratios
• Assumable by future buyers

Cons

• Mortgage insurance required for life of loan
• Loan limits may be lower
• Property must meet FHA standards
• May have higher overall costs

Conventional Loans at a Glance

Conventional loans are not government-backed and typically have stricter requirements.

Pros

• No upfront mortgage insurance
• PMI removable at 20% equity
• Higher loan limits
• More property types eligible
• Lower total cost for strong borrowers

Cons

• Higher credit requirements (typically 620+)
• Larger down payment may be needed
• Stricter DTI requirements

Side-by-Side Comparison

Which Should You Choose?

Choose FHA If:

• Your credit score is below 680
• You have limited savings for down payment
• You've had past credit issues
• You have higher debt-to-income ratio

Choose Conventional If:

• Your credit score is 700+
• You can put 20%+ down
• You want to avoid mortgage insurance
• The property doesn't meet FHA standards

The Bottom Line

There's no one-size-fits-all answer. Calculate your total costs with each option using our Mortgage Calculator.