FHA vs. conventional loans
Reviewed August 2026
For most first-time buyers the choice comes down to two loans: FHA and conventional. The right one depends mostly on your credit score and how the mortgage insurance shakes out.
The key differences
Both are common first-time-buyer options, but they treat credit and insurance differently:
- Credit score: FHA allows 580+ (3.5% down) or 500–579 (10% down); conventional typically wants 620+.
- Down payment: FHA is 3.5% minimum; conventional can be as low as 3% for first-time buyers.
- Mortgage insurance: conventional PMI cancels around 20% equity; FHA mortgage insurance (MIP) often lasts the life of the loan unless you refinance.
- Property condition: FHA appraisals apply stricter minimum-property standards.
How to choose
With a lower credit score (580–620) or thin credit, FHA is often the path in. With a 620+ score — especially 700+ — a conventional loan usually wins over time because you can cancel PMI, whereas FHA's MIP tends to stick around.
A common strategy is to buy with FHA now and refinance into a conventional loan later once your score and equity improve.
Frequently asked
Is an FHA or conventional loan better?
Neither is universally better. FHA is more forgiving on credit and is often cheaper up front for lower scores; conventional is usually cheaper long-term for stronger credit because PMI can be canceled.