FHA vs Conventional Loan — Which Is Better for You? 2026 Guide
Understand the key differences between FHA and conventional loans.
FHA Loan Requirements and Benefits
FHA loans allow down payments as low as 3.5% and accept credit scores around 580. They are insured by the FHA and popular with first-time buyers. The trade-off is mortgage insurance premium (MIP), which you pay for the life of the loan in most cases.
Conventional Loan Requirements and Benefits
Conventional loans require higher credit scores (usually 620+) but reward strong borrowers with lower rates and no mortgage insurance when you put down at least 20%. With a smaller down payment, private mortgage insurance (PMI) drops off once you reach 20% equity.
Comparison Table: FHA vs Conventional
Here is a quick side-by-side comparison of FHA and conventional loans:
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Down payment | 3.5% minimum | 3%–20% (20% avoids PMI) |
| Credit score | 500–580 with 10% down | 620 or higher |
| Mortgage insurance | MIP — usually for the loan's life | PMI — drops at 20% equity |
| Loan limits | Up to $766,550 (2026) | Up to $766,550 (2026) |
| Interest rates | Often slightly lower base rate | Lower overall for strong credit |
Which Loan Is Right for You?
FHA loans shine for borrowers with lower credit or a small down payment. Conventional loans usually cost less over time if you qualify. Compare rates, insurance and monthly payments with a mortgage calculator before choosing.
Frequently Asked Questions
Can I buy a house with 3.5% down?
Yes, with an FHA loan you can put down as little as 3.5%. Some conventional programs also allow 3% down, but you will likely pay PMI until you build 20% equity.
Is FHA mortgage insurance permanent?
For most FHA loans taken out after June 2013, MIP lasts for the life of the loan if you put down less than 10%. The only way to remove it is to refinance into a conventional loan.
Which loan has lower rates: FHA or conventional?
FHA loans often have slightly lower base rates, but mortgage insurance makes the total cost higher. Conventional loans usually have lower overall costs for borrowers with good credit and a down payment of 20%.