The three differences that actually matter
People ask “FHA or conventional?” as if one is simply better. It is not that kind of question. The two programs are built for different borrowers, and they diverge in three concrete places: how much you put down, what credit score it takes to get in, and how mortgage insurance works. Everything else is mostly the same loan.
Get those three right for your situation and the choice usually makes itself. Below is each one in plain English, followed by who each program tends to fit.
Down payment
FHA’s headline number is 3.5% down, available with a 580 credit score. Conventional loans go as low as 3% down on many first-time-buyer programs, but typically expect a stronger credit profile to get there. Neither requires the old “20% down” — that figure only matters for avoiding mortgage insurance on a conventional loan.
Credit
This is the cleanest dividing line. FHA publishes a 580 minimum for its lowest down payment and allows 500–579 with 10% down. Conventional loans commonly set 620 as the floor. If your score sits in the high-500s to low-600s, FHA is frequently the open door; once you are comfortably above 620, conventional becomes competitive and often more cost-effective over time.
Mortgage insurance
This is where the long-run cost difference lives. FHA charges an upfront MIP of 1.75% plus a monthly MIP, and on most low-down-payment FHA loans that monthly MIP stays for the life of the loan. Conventional PMI applies only while you owe more than 80% of the home’s value — you can request cancellation at 80% LTV, and federal law auto-terminates it at 78%. For a borrower who will build equity and stay put, cancellable PMI is a real advantage.
Who each program tends to fit
FHA tends to fit buyers who are still building credit, have a thinner file, or had a credit event in the past few years. Its flexible underwriting and lower score threshold open the door when conventional will not yet.
Conventional tends to fit buyers with stronger credit who want mortgage insurance that eventually disappears, or who are buying above the FHA loan limit in their county. With 20% down it skips mortgage insurance entirely.
Plenty of buyers qualify for both. When that happens, the decision comes down to the total cost over the time you expect to keep the loan — which is exactly the kind of side-by-side a pre-qualification runs on your real file.
Can you switch from FHA to conventional later?
Yes — and many buyers do. A common path is to use FHA to get into a home now, then refinance into a conventional loan once your equity reaches 20% and your credit has strengthened, which ends the FHA mortgage insurance for good. Whether that refinance pays off depends on the math at the time, so it is a conversation to have when you are closer, not a guarantee to bank on at purchase.
