FHA loans trade permanent mortgage insurance for easier qualifying; conventional loans reward stronger credit and down payments with insurance that eventually disappears.
Side by side
| FHA | Conventional | |
|---|---|---|
| Minimum down payment | 3.5% | 3–5% (20% avoids PMI) |
| Minimum credit score | ~580 for 3.5% down | ~620, better rates above 740 |
| Mortgage insurance | MIP — usually for the life of the loan | PMI — cancels at 78% LTV |
| Loan limits | Lower, county-based | Higher conforming limits |
| Best for | Lower credit / smaller down payment | Stronger credit, wants insurance to end |
Strengths of each
FHA — strengths
- Easier credit qualifying
- Lower minimum down payment
- Assumable by future buyers
Conventional — strengths
- PMI cancels automatically
- No upfront mortgage insurance fee
- Available on higher loan amounts
Worked example
A $350,000 FHA loan carries permanent MIP; the same loan conventional at 10% down carries PMI that disappears once the balance hits 78% LTV — often within 5–8 years.
FAQ
Can I refinance out of FHA MIP?
Yes — refinancing into a conventional loan once you have enough equity removes MIP entirely.
Which has the lower payment?
Depends on credit score — FHA rates and MIP are fixed regardless of score; conventional PMI and rate both improve with stronger credit.