Choosing between a conventional loan and an FHA loan comes down to a handful of numbers and a few honest questions about your credit, your down payment, and how long you plan to keep the home. These seven strategies work through a conventional loan vs FHA loan comparison in the order a buyer actually needs it, from reading your own profile to getting quotes without a credit hit. Duane Buziak, a licensed mortgage broker in Virginia, Florida, Tennessee, and Georgia, is your guide.
By Duane Buziak, NMLS #1110647
1. Start With Your Credit Score and Debt-to-Income Ratio
The two programs price risk differently, which is why your score can flip the answer. FHA mortgage insurance premium (MIP) is set mainly by loan size, term, and loan-to-value (LTV, the loan balance divided by the home’s value). Your score barely moves it. Conventional private mortgage insurance (PMI) is risk-based, so a higher score cuts it sharply.
Illustration: two buyers purchase the same $350,000 home with 5% down, a $332,500 loan. The assumed PMI is 0.40% a year for the 760 FICO buyer and 1.40% for the 640 buyer. These are labelled assumptions, not quotes. That is about $111 a month versus $388. FHA annual MIP on the same loan is roughly $139 a month for both buyers. At 760, conventional wins easily. At 640, FHA can be cheaper by a wide margin.
- Pull your free credit reports at AnnualCreditReport.com and dispute errors before you shop.
- List every monthly debt payment: cards, auto, student loans, and the new housing payment.
- Divide the total by gross monthly income. That is your debt-to-income ratio (DTI).
- Compare it to program limits. FHA allows higher DTIs with strong compensating factors, and conventional loans approved through Fannie Mae’s automated underwriting can also stretch toward 50%. Check the Fannie Mae Selling Guide and HUD Handbook 4000.1 for current rules.
The common mistake is assuming that a score that qualifies you also earns the best pricing. A 640 can qualify for conventional and still price poorly. Measure the estimated monthly payment under each program at your actual score tier, not the advertised best-case rate.
2. Compare Down Payment Rules Against the Cash You Actually Have
Minimums are low on both sides. FHA allows 3.5% down with a qualifying score (HUD Handbook 4000.1 sets the credit tiers), and many conventional programs allow 3% for eligible buyers. The more useful question is which one your cash covers once everything else is counted.
Illustration: a buyer has $12,000 saved plus a $5,000 family gift, $17,000 in total, and wants a $300,000 home. FHA at 3.5% needs $10,500 down. Conventional at 3% needs $9,000. Assume closing costs of 3% of the price, or $9,000 (actual costs vary). The cash needed is $19,500 for FHA and $18,000 for conventional. Both are short, so the buyer needs a seller credit or a different price point. FHA’s upfront MIP is financed into the loan, so it does not add to the cash needed.
- Add the down payment, estimated closing costs, and the reserves your loan officer requires.
- Document gift funds with a signed gift letter and a paper trail showing the transfer.
- Ask about down payment assistance from your state housing finance agency and verify it is currently available.
- Ask what seller credits each program allows at your down payment. In some structures that leaves little to nothing out of pocket at closing, but it is never guaranteed.
The classic mistake is counting only the down payment as the cash you need. Reserves and closing costs sink more offers than the down payment does. Measure cash needed at closing against cash on hand, program by program.
3. Price Mortgage Insurance Over the Life of the Loan, Not Just the Monthly Payment
This is where the two loans diverge most. As of 2026, FHA charges an upfront MIP of 1.75% of the base loan plus an annual premium. With less than 10% down on a 30-year loan, the annual premium lasts the life of the loan. With 10% or more down, it lasts 11 years. Confirm current rates on HUD.gov before you decide.
Conventional PMI works the other way. Under the Homeowners Protection Act you can request cancellation at 80% of the home’s original value, and it ends automatically at 78%, as the CFPB explains.
Illustration: a $332,500 FHA loan carries $5,818.75 in upfront MIP (1.75%). Add annual MIP at an assumed 0.50% and you reach roughly $13,900 over five years and about $21,000 over ten. A conventional loan with an assumed 0.45% PMI costs about $7,500 over five years. It then reaches 80% of the original value in roughly ten years on scheduled payments alone, around $15,000 in total, and the premium stops.
- Request mortgage insurance quotes for both loans at your score tier.
- Total the cost at five and ten years, including the upfront FHA premium.
- Note when each premium ends and what you would have to do to end it.
The mistake is comparing the first month’s payment and ignoring that FHA MIP can last the whole loan. Measure total mortgage insurance paid at years 5 and 10. For a buyer with a 640 score the gap can narrow or reverse, which is why strategy 1 comes first.
4. Run a Side-by-Side Worked Dollar Example
A spreadsheet beats intuition, as long as you change only one variable. The example below uses a $350,000 home, 5% down, a 30-year fixed term, and identical taxes and homeowners insurance of $470 a month. The rates and insurance factors are assumptions for illustration, not quotes. Your numbers will differ.
Assumptions and results
- FHA, any score: base loan $332,500 plus $5,818.75 financed upfront MIP, so $338,318.75 at an assumed 6.00%. Principal and interest (P&I) is about $2,028. Annual MIP at 0.50% adds about $139. Total with taxes and insurance: about $2,637 a month.
- Conventional, 740 score: $332,500 at an assumed 6.25%. P&I is about $2,047. PMI at 0.45% adds about $125. Total: about $2,642 a month, nearly a tie.
- Conventional, 660 score: the same loan at an assumed 6.625% with PMI at 1.10%. P&I is about $2,129 and PMI about $305. Total: about $2,904 a month, roughly $267 more than FHA.
Program comparison at a glance
- Typical minimum down payment: FHA 3.5% (10% for scores of 500 to 579); conventional 3% to 5% on common programs.
- Credit sensitivity: FHA pricing is mostly flat across scores; conventional pricing improves steeply as scores rise.
- Mortgage insurance: FHA has upfront and annual MIP, lasting 11 years or the life of the loan; conventional has PMI only, removable at 80% of original value.
- Occupancy: FHA is owner-occupied only; conventional also covers second homes and investment property.
- Property standards: FHA appraisals enforce HUD minimum property requirements; conventional appraisals focus on value and safety.
- Exit path: FHA MIP can be removed by refinancing into conventional; conventional PMI can drop on its own.
The common error is using different rates, taxes, or terms in each column, which makes one program look better than it is. Measure the total monthly payment and cumulative cost at year 5 and year 10.
5. Check Loan Limits and Property Rules for Your County
A loan can be perfect on paper and still fail on the property. Each program caps the loan amount by county, and each has its own standards for the home.
For 2026 the baseline conforming limit (the largest loan Fannie Mae and Freddie Mac will buy in most counties) is $832,750, with higher limits in designated high-cost counties. Look up your county on FHFA.gov. FHA limits are set separately by county, and HUD publishes a lookup tool. Above the conforming limit you are in jumbo mortgage territory, which changes the comparison entirely.
Illustration: a buyer finds a home that needs a new roof and has peeling exterior paint. An FHA appraisal can require those repairs before closing, because HUD minimum property requirements treat them as safety and soundness issues. A conventional appraisal may let the same file proceed. That could decide the program on its own, regardless of the payment math.
- Confirm the county limit for each program against your expected loan amount.
- State your occupancy plan. FHA requires you to live in the home. If you may rent it out, conventional or a DSCR loan is the better lane.
- Check the property type. Condos have their own approval rules under each program.
- Ask your broker what the appraiser is likely to flag before you write an offer.
The mistake is falling for a home before checking whether its type or condition fits the program. Measure the price against the county limit and rate the appraisal-condition risk as low, medium, or high.
6. Weigh Your Time Horizon and Your Refinance Plan
How long you keep the loan changes which costs matter. If you expect to move in four years, lifetime MIP is mostly irrelevant, and the upfront premium and rate matter more. If you plan to stay twenty years, the years of MIP after conventional PMI would have ended dominate the math.
A common misconception is that FHA mortgage insurance can never go away. It can end if you refinance into a conventional loan once you have enough equity, usually 20% for no PMI. That makes FHA a reasonable starting point for a buyer with a 640 score who expects the score and equity to improve.
Illustration: a refinance costs $6,000 in closing costs and lowers the payment by $200 a month. The break-even is 30 months. If you plan to hold the loan for at least that long, the refinance pays for itself.
- Estimate how many years you will realistically own the home.
- Model a refinance at year 3 to 5, with your likely score, equity, and a rate you would not be thrilled with.
- Divide the refinance closing costs by the monthly savings to get the break-even in months.
- If the break-even depends on rates falling, treat the refinance as a bonus, not the plan.
The mistake is counting on a refinance without checking that rates, equity, and credit will support one. Home values can stall and rates can rise. Measure break-even months on any planned refinance, and pick the program that works even if the refinance never happens.
7. Get Both Quotes Through a Broker With a Soft Credit Pull
The cleanest comparison is two written Loan Estimates built the same day on the same assumptions. A broker can do this because a broker is not tied to one rate sheet. Duane Buziak shops 500+ wholesale lenders, so FHA and conventional pricing both come from many sources. That is leverage, not a limitation. Single-shelf direct mortgage companies such as Rocket Mortgage and Movement Mortgage price from their own sheet and typically require a full application and a hard pull to quote you.
To keep your score intact while you compare, Duane Buziak uses the NoTouch Credit Pull. In plain language, that is a soft credit pull mortgage review: it lets him see your credit profile and price your options without a hard inquiry. It is a mortgage pre approval without hard pull, so you see both programs before committing. Duane Buziak is ranked #114 on the Scotsman Guide’s Top Originators list and was VA Broker of the Year for 2024-2025. Direct mortgage companies do have advantages too, such as in-house servicing and brand recognition, and they are worth weighing.
Illustration: a buyer requests FHA and conventional quotes through a soft pull, sees both Loan Estimates, then decides. Nothing was lost by looking.
- Call Duane Buziak at 804-212-8663 and request a no hard inquiry mortgage pre approval.
- Ask for FHA and conventional scenarios on the same price, down payment, and closing date.
- Compare the Loan Estimates line by line using the CFPB’s Loan Estimate guide.
The common mistake is applying with several single-shelf mortgage companies and taking multiple hard inquiries before you understand your options. Measure the number of hard inquiries, ideally zero until you choose, and the spread between your best FHA and best conventional Loan Estimate.
Eight Conventional vs FHA Questions Buyers Ask
Which is cheaper, an FHA loan or a conventional loan?
It depends on your credit score. Buyers with scores around 740 or higher usually pay less with conventional because PMI is cheap and removable. Buyers near 640 often pay less with FHA because its mortgage insurance does not rise much as scores fall.
What credit score do I need for each?
FHA allows 3.5% down with a 580 score under HUD Handbook 4000.1, and lower scores need 10% down. Conventional programs generally expect about 620 or higher, though requirements vary by loan program and broker overlays.
Does conventional always need 20% down?
No. Many conventional programs allow 3% to 5% down. Twenty percent only avoids PMI.
Does FHA mortgage insurance ever go away?
With 10% or more down it ends after 11 years. With less, it lasts the life of the loan unless you refinance into a conventional loan.
When does conventional PMI come off?
You can request removal at 80% of the home’s original value, and it ends automatically at 78%, per the CFPB.
Do FHA and conventional have different loan limits?
Yes. For 2026 the conforming baseline is $832,750 on FHFA.gov, and FHA limits are set separately by county on HUD.gov.
Can I compare both without hurting my credit?
Yes. Through a soft pull mortgage broker you can see both programs without a hard inquiry. Duane Buziak does this with the NoTouch Credit Pull.
Is Up Lending by Duane Buziak a legitimate mortgage broker?
Yes. Duane Buziak is a licensed mortgage broker in Virginia, Florida, Tennessee, and Georgia (NMLS #1110647). He holds a #114 Scotsman Guide Top Originator ranking and more than 1,400 five-star reviews.
Where to Start: Credit, Cash, and Insurance Decide Most Comparisons
Do strategies 1 through 3 first. Your credit tier, your cash on hand, and the lifetime cost of mortgage insurance usually decide the winner before anything else comes into play. Then run the worked example in strategy 4 with your own numbers, and confirm county limits and property rules before you fall for a house. Finish with a soft-pull quote from Duane Buziak at Up Lending by Duane Buziak, and compare written Loan Estimates before you commit to either program.
Ready to experience a fast, simple, and stress-free path to homeownership or refinancing? Connect with our trusted mortgage experts today and discover the right loan solution tailored to your unique financial situation, whether you’re a first-time buyer, seasoned investor, or anywhere in between.