FHA vs. Conventional Loan Guide

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Loan Program Education

Side-by-Side Comparison: FHA 3.5% Down vs. Conventional 3%–5% Down Mortgages

Quick Answer (BLUF): FHA loans offer more forgiving credit-score pricing and higher debt-to-income ceilings with a 3.5% down payment, whereas Conventional 3%–5% down programs allow borrowers with 720+ credit scores to cancel mortgage insurance once equity reaches 20%.

Visual Cost & Payment Breakdown · FHA vs. Conventional Loan Guide

1. Principal & Interest (P&I) Driven by Loan Amount, Note Rate, and Amortization Term (15 vs 30 Yr) 2. Tax, Insurance & MI Escrows County Property Tax + Hazard Ins + HOA / PMI / MIP / VA Funding Fee 3. CFPB Loan Estimate Audit Compare Page 2 Box A + Box B minus Box J Lender Credits

The friendly answer

FHA loans are mortgages insured by the Federal Housing Administration, part of HUD, and made by approved private lenders. They are built for buyers with smaller savings or less-than-perfect credit, in exchange for mortgage insurance premiums. Most first-time buyers can tell whether FHA is worth a look after three questions: credit, savings and the kind of home they want.

Last reviewed against the primary sources listed below.

ToolMIP explainerSee what the premiums mean in dollars.Chapter 1Is FHA a fit?Who it was designed for.Chapter 2MIP explainedUpfront and annual premiums.Chapter 3Property standardsWhat makes a house qualify.Chapter 4County loan limitsHow to look yours up.Chapter 5Gift fundsHelp from family, documented.Chapter 6FHA vs conventionalChoosing between the two.New guideNot only first-timersWho can use an FHA loan, including repeat buyers, and the main limits.New guideAfter credit setbacksHow FHA treats past bankruptcy, foreclosure and other credit events.GlossaryKey termsPlain definitions with sources.GuideDown payment helpHow assistance programs work alongside an FHA purchase loan.GuideCondosHow FHA condo project approval and single-unit approval work.PrintableLender questionsQuestions to bring to any lender, ready to print.

Who runs what

HUD sets FHA rules in its Single Family Housing Policy Handbook. Lenders approved by FHA make the loans, and FHA insures them, which is why lenders can accept buyers they might otherwise turn down.

Before you go further

This is not a government website. HUD's own FHA buyer page and a HUD-approved housing counselor are free places to check anything you read here.

From HUD and the CFPB