Both are popular for buyers with a smaller down payment. FHA is more forgiving on credit; conventional is usually cheaper for stronger credit, and its mortgage insurance can come off.
Side by side
| FHA loan | Conventional loan | |
|---|---|---|
| Credit | More forgiving of lower scores and past credit events | Rewards higher scores with better pricing |
| Mortgage insurance | Upfront and annual premium, often for the life of the loan | Monthly PMI with less than 20% equity, removable later |
| Debt-to-income | Often allows higher ratios | Standard limits, higher with strong files |
| Property | Must meet FHA property standards; condos need FHA approval | More flexible on condos and property condition |
| Loan limits | FHA county limits | Conforming county limits |
When an FHA loan fits
- Your credit score is on the lower side, or you have a recent credit event.
- Your debt-to-income ratio is higher than conventional allows.
When a conventional loan fits
- Your credit is strong.
- You want mortgage insurance that can be removed.
- The property is a condo without FHA approval.
Guides and calculators
Questions
Can I switch from FHA to conventional later?
Yes, by refinancing once your credit and equity improve, which can remove FHA’s mortgage insurance.
Which has the lower payment?
It depends on your credit and down payment, because mortgage insurance is priced differently. Enter both quotes in the mortgage payment calculator to compare.
Are FHA loans only for first-time buyers?
No. FHA is open to any buyer who will live in the home, first-time or not.
