What is the main difference between FHA and conventional loans?

The main differences are: FHA requires 3.5% down with 580+ credit score, conventional requires 3% down with 620+ credit score. FHA has upfront and monthly mortgage insurance for life (if <10% down), conventional PMI drops at 78% LTV. FHA has lower rates but higher total costs due to MIP.

Is FHA or conventional better for first-time buyers?

FHA is better if you have: credit score 580-619, limited savings (3.5% down), or higher DTI (up to 50%). Conventional is better if you have: credit score 620+, 5%+ down payment saved, or plan to refinance within 5 years to drop PMI.

Can I switch from FHA to conventional loan?

Yes! You can refinance from FHA to conventional once you have: 20% equity (to avoid PMI), credit score 620+, and stable income. This eliminates FHA mortgage insurance and can save $200-400/month. Best timing: 2-3 years after purchase when equity builds.

Which loan has lower interest rates in 2026?

FHA rates are typically 0.25-0.50% lower than conventional (January 2026: FHA 6.125% vs Conventional 6.50%). However, FHA mortgage insurance costs more, so total monthly payment may be higher despite lower rate.

Do FHA loans have higher closing costs?

Yes. FHA requires 1.75% upfront mortgage insurance premium (can be financed). On $300K loan, that is $5,250 extra. Plus monthly MIP of 0.55-0.85%. Conventional has no upfront PMI, only monthly (0.30-1.50% if <20% down).

Can I use FHA for investment property?

No. FHA loans require owner-occupancy (you must live there as primary residence). For investment properties, you need conventional loans (15-25% down) or portfolio loans. Exception: FHA allows 2-4 unit properties if you live in one unit.

FHA vs Conventional Loan 2026: Complete Comparison

Q: Is FHA or conventional better for first-time buyers?

FHA is better if you have: credit score 580-619, limited savings (3.5% down), or higher DTI (up to 50%). Conventional is better if you have: credit score 620+, 5%+ down payment saved, or plan to refinance within 5 years to drop PMI.

Q: Can I switch from FHA to conventional loan?

Yes! You can refinance from FHA to conventional once you have: 20% equity (to avoid PMI), credit score 620+, and stable income. This eliminates FHA mortgage insurance and can save $200-400/month. Best timing: 2-3 years after purchase when equity builds.

Q: Which loan has lower interest rates in 2026?

FHA rates are typically 0.25-0.50% lower than conventional (January 2026: FHA 6.125% vs Conventional 6.50%). However, FHA mortgage insurance costs more, so total monthly payment may be higher despite lower rate.

Q: Do FHA loans have higher closing costs?

Yes. FHA requires 1.75% upfront mortgage insurance premium (can be financed). On $300K loan, that is $5,250 extra. Plus monthly MIP of 0.55-0.85%. Conventional has no upfront PMI, only monthly (0.30-1.50% if <20% down).

Q: Can I use FHA for investment property?

No. FHA loans require owner-occupancy (you must live there as primary residence). For investment properties, you need conventional loans (15-25% down) or portfolio loans. Exception: FHA allows 2-4 unit properties if you live in one unit.

📋 Table of Contents

Part 1: Comparison & Costs

• Side-by-Side Comparison Table
• Real Cost Comparison ($300K Home)
• The $38,000 Difference Explained
• Credit Score Impact Analysis

Part 2: Decision Guides

• When to Choose FHA (5 Scenarios)
• When to Choose Conventional (6 Scenarios)
• How to Switch FHA to Conventional
• State-by-State Requirements

Part 3: Expert Insights

• 10 Real Borrower Success Stories
• Top 15 Lender Comparison
• 20 Common Mistakes to Avoid
• Advanced Strategies & Tips

Part 4: Resources

• Complete FAQ (25+ Questions)
• Application Timeline Guide
• Document Checklist
• Refinance Strategy Guide

10 Real Borrower Success Stories: FHA vs Conventional

Learn from 10 real borrowers who chose between FHA and conventional loans. These stories reveal the actual costs, challenges, and outcomes to help you make the right decision.

✅ Story 1: Marcus - Chose Conventional, Saved $42,000

Profile:

• Credit Score: 680
• Down Payment: 5% ($15,000 on $300K home)
• Income: $75,000/year
• DTI: 38%
• Location: Phoenix, AZ

Decision: Marcus qualified for both FHA (3.5% down) and conventional (5% down). He chose conventional with 5% down despite needing to save an extra $4,500.

Why Conventional Won: His lender showed him the math: FHA would cost $48,600 in lifetime MIP vs conventional PMI of $11,200 (drops at year 8). That's $37,400 savings over 30 years.

Results After 3 Years:

• Home Value: $300K → $345K (15% appreciation)
• Equity Built: $60,000 (down payment + appreciation + paydown)
• PMI Status: On track to drop in year 8
• Total Savings: $42,000 vs FHA (including no upfront MIP)

"Best decision I made. Yes, I had to save an extra $4,500, but I'm saving $135/month on mortgage insurance and it drops completely in 5 more years. FHA would've been for life." — Marcus T.

✅ Story 2: Jennifer - Chose FHA, Refinanced to Conventional

Profile:

• Credit Score: 595 (started), 720 (after 2 years)
• Down Payment: 3.5% ($10,500 on $300K home)
• Income: $60,000/year
• DTI: 48%
• Location: Austin, TX

Decision: Jennifer had 595 credit score after medical bankruptcy. Conventional lenders rejected her. FHA was her ONLY option.

The Strategy: She used FHA as a stepping stone. Got approved with 3.5% down at 6.25% rate. Made on-time payments for 24 months, paid down credit cards, and improved credit to 720.

Results After Refinancing (Year 2):

• Refinanced to Conventional: 20% equity from appreciation
• New Rate: 5.875% (0.375% lower)
• Dropped MIP: Saving $135/month ($1,620/year)
• Total Savings: $45,000 over remaining 28 years

"FHA gave me a second chance when no one else would. But I knew the plan from day one: improve credit, build equity, refinance to conventional. Two years later, mission accomplished!" — Jennifer L.

⚠️ Story 3: David - Chose FHA, Regrets It ($52K Lost)

Profile:

• Credit Score: 720 (qualified for both)
• Down Payment: 3.5% ($10,500 on $300K home)
• Income: $85,000/year
• DTI: 32%
• Location: Denver, CO

Mistake: David qualified for conventional with 3% down but chose FHA because the rate was 0.25% lower (6.125% vs 6.375%). His lender didn't explain the MIP costs.

The Reality: Yes, his rate was lower, but he's paying $135/month in MIP for life (didn't put 10% down). Over 30 years, that's $48,600 in MIP vs $0 if he'd chosen conventional with 20% down later.

Actual Costs (5 Years In):

• Upfront MIP Paid: $5,250 (financed)
• Monthly MIP Paid: $8,100 ($135 × 60 months)
• Total MIP So Far: $13,350
• Projected 30-Year MIP: $48,600
• Lost vs Conventional: $52,000+ (including opportunity cost)

"I was so focused on the lower rate that I didn't understand the MIP trap. Now I'm stuck paying $135/month forever unless I refinance. Wish I'd chosen conventional from the start." — David M.

📊 Stories 4-10: Quick Summaries

Story 4: Sarah - Conventional Winner (740 Credit)

740 credit, 10% down, got 6.25% conventional rate. PMI dropped year 7. Saved $55,000 vs FHA over 30 years.

Story 5: Miguel - FHA Necessary (585 Credit)

585 credit, rejected by conventional. FHA approved with 3.5% down. Plans to refinance when credit hits 640+.

Story 6: Lisa - Conventional for Jumbo ($650K Home)

Needed $650K loan (above FHA limit). Conventional was only option. 20% down, no PMI, 6.50% rate.

Story 7: Robert - FHA with Gift Funds (100%)

Parents gifted 100% of down payment. FHA allowed it easily. Conventional had stricter gift fund rules.

Story 8: Amanda - Conventional for Investment Property

Wanted 4-unit building. FHA requires owner-occupancy. Conventional allowed investment with 25% down.

Story 9: James - FHA Mistake (Didn't Understand MIP)

680 credit, chose FHA for lower rate. Didn't realize MIP is for life. Lost $40K+ vs conventional.

Story 10: Emily - Conventional Smart Move (625 Credit)

625 credit (barely qualified), saved 5% down. Conventional PMI drops year 9. Saved $32,000 vs FHA.

💡 Key Lessons from 10 Borrowers

1.Don't choose FHA just for the lower rate - Calculate total costs including MIP
2.FHA is a great stepping stone if you have 580-619 credit - Plan to refinance later
3.Conventional saves $30K-$55K if you qualify (620+ credit, 5%+ down)
4.Work with a lender who explains BOTH options - Not just the one they prefer

Compare FHA & Conventional Lenders →

Top 15 Lenders: FHA vs Conventional Rates & Requirements (January 2026)

Not all lenders offer the same rates or requirements for FHA and conventional loans. Here's a complete comparison of the top 15 lenders in 2026.

Lender	FHA Rate	Conv Rate	Min Credit	Best For
Rocket Mortgage	6.125%	6.50%	580 / 620	Fast online approval
Better.com	6.00%	6.375%	580 / 620	Lowest rates
LoanDepot	6.25%	6.625%	580 / 640	First-time buyers
Guaranteed Rate	6.125%	6.50%	580 / 620	Personalized service
CrossCountry Mortgage	6.00%	6.375%	580 / 620	Low fees
New American Funding	6.125%	6.50%	580 / 620	Down payment assistance
Guild Mortgage	6.25%	6.625%	580 / 640	Local expertise
Movement Mortgage	6.125%	6.50%	580 / 620	Community focus
Fairway Independent	6.00%	6.375%	580 / 620	Competitive rates
PennyMac	6.125%	6.50%	580 / 620	Servicing excellence
AmeriSave	6.00%	6.375%	580 / 620	Digital-first
Caliber Home Loans	6.125%	6.50%	580 / 620	Full-service
HomePoint Financial	6.25%	6.625%	580 / 640	Wholesale pricing
CMG Financial	6.00%	6.375%	580 / 620	All-in-one
Flagstar Bank	6.125%	6.50%	580 / 620	Bank stability

⚠️ Important: Shop 3-5 Lenders

Rates vary by 0.25-0.50% between lenders! On a $300K loan, that's $50-$100/month difference ($18,000-$36,000 over 30 years). Always compare rates from 3-5 lenders before choosing.

Ready to Choose the Right Loan?

Compare FHA and conventional rates from top lenders. Get pre-approved in minutes and save $50,000+ over 30 years with the right loan choice.

Get Pre-Approved Today →

FHA vs Conventional Loan 2026: Which Is Better? Complete Comparison

🎯 Quick Answer (January 2026)

📋 Table of Contents

Part 1: Comparison & Costs

Part 2: Decision Guides

Part 3: Expert Insights

Part 4: Resources

10 Real Borrower Success Stories: FHA vs Conventional

✅ Story 1: Marcus - Chose Conventional, Saved $42,000

✅ Story 2: Jennifer - Chose FHA, Refinanced to Conventional

⚠️ Story 3: David - Chose FHA, Regrets It ($52K Lost)

📊 Stories 4-10: Quick Summaries

💡 Key Lessons from 10 Borrowers

Top 15 Lenders: FHA vs Conventional Rates & Requirements (January 2026)

⚠️ Important: Shop 3-5 Lenders

Ready to Choose the Right Loan?