FHA vs. Conventional Loans: What Is the Difference?
A side-by-side look at two of the most common loan types, so you can see which one may fit your situation.
The Quick Comparison
| FHA | Conventional | |
|---|---|---|
| Backed by | Government (FHA) | Not government-backed; follows Fannie Mae/Freddie Mac guidelines |
| Minimum credit score | 580 for 3.5% down; 500–579 requires 10% down | No fixed minimum; a lower score means higher monthly PMI |
| Minimum down payment | 3.5% (with 580+ score) | As low as 3% for eligible first-time buyers; 5% more common |
| Mortgage insurance | Required regardless of down payment; can last for the life of the loan | Only required if down payment is under 20%; can be canceled at 20% equity |
| Property type | Primary residence; some multi-unit properties may qualify | Primary residence, second home, or investment property |
Where FHA Tends to Have the Edge
- More flexible qualifying guidelines, especially for a shorter or less established credit history
- Lower minimum credit score to qualify with a low down payment
- Can be paired with down payment assistance in many cases
Where Conventional Tends to Have the Edge
- Mortgage insurance can be canceled once you reach 20% equity, unlike FHA in most cases
- No fixed minimum credit score, so a strong credit profile isn't capped by a program limit
- More flexibility for second homes and investment properties
Which One Costs Less Over Time?
It depends on your credit score and how long you plan to keep the loan. A buyer with a lower credit score may find FHA's mortgage insurance costs less initially, but conventional's ability to cancel PMI at 20% equity can make it cheaper in the long run for buyers who qualify. This is very situation-specific, so it's worth running your actual numbers side by side.
Common Questions
Which one is easier to qualify for?
FHA tends to have more flexible guidelines, especially around credit history, though it's worth reviewing your specific numbers for both together.
Can I switch from FHA to Conventional later?
Yes, through a refinance, once you qualify and it makes financial sense.
Does FHA always have a lower rate than Conventional?
Not necessarily. Rate depends on your credit, the market, and other factors, not just the loan type.
Can I use either loan for a second home?
Conventional loans can be used for second homes and investment properties. FHA loans are generally limited to primary residences.