FHA loans accept lower credit scores (580 with 3.5% down) and higher debt ratios, but charge an upfront mortgage insurance premium and monthly insurance that usually lasts for the life of the loan. Conventional loans need around a 620 score and 3% to 5% down, cost less with good credit, and their mortgage insurance can be removed. As a rough guide, scores above about 700 tend to favor conventional; lower scores often favor FHA.
Side by side
| FHA | Conventional | |
|---|---|---|
| Minimum credit score | 580 (500 with 10% down) | About 620 |
| Minimum down payment | 3.5% | 3% for many first-time buyers, otherwise 5% |
| Mortgage insurance | 1.75% upfront plus about 0.55% a year | None at 20% down; otherwise PMI priced by credit and down payment |
| Insurance ends | After 11 years with 10%+ down; otherwise never | At 20% to 22% equity |
| Debt-to-income | Often allowed above 50% with strong factors | Usually up to about 45% to 50% |
| Loan limits | Set by county, lower than conventional in most areas | Conforming limits by county |
| Property standards | Stricter appraisal requirements on condition | Standard appraisal |
When FHA makes sense
- Your credit score is below about 680.
- Your debt-to-income ratio is high.
- You’re buying a two- to four-unit home to live in, with as little as 3.5% down.
- You expect to refinance once your credit improves.
When conventional makes sense
- Your score is about 700 or higher.
- You can put down 5% or more.
- You want mortgage insurance that goes away.
- You’re buying a home that might not meet FHA’s condition standards, or a condo that isn’t FHA-approved.
Loan limits
Both programs cap how much you can borrow, by county. FHA limits are lower in most areas. See FHA loan limits and conforming loan limits by county; above the conforming limit, you’ll need a jumbo loan.
Sellers and offers
In competitive markets, some sellers prefer conventional offers because FHA appraisals can flag repairs. A strong pre-approval and agent can help; see your offer’s position with the offer strength score.
Check your score’s effect
Your credit score shifts the comparison. See which loans you qualify for with credit score to loan options, and compare mortgage insurance with the PMI calculator.
Common questions
Is FHA or conventional better for first-time buyers?
With a credit score above about 700, conventional usually costs less and its mortgage insurance goes away. With lower scores or high debt ratios, FHA is often better.
Can I switch from FHA to conventional later?
Yes, by refinancing once you have enough equity and a good score, which can remove FHA mortgage insurance.
Do sellers dislike FHA offers?
Some prefer conventional offers in competitive markets because FHA appraisals can require repairs; a strong pre-approval helps.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.