Jeni VanOrnum | Real Estate Insights & Education

Choosing between an FHA and conventional loan is one of the first major decisions first-time homebuyers face. Let’s compare.

FHA Loans

Pros:

• Low down payment (3.5% with 580+ credit score)
• More lenient credit requirements (as low as 500 with 10% down)
• Lower interest rates for borrowers with lower credit scores
• Gift funds acceptable for down payment

Cons:

• Mortgage insurance required for life of loan (if less than 10% down)
• Upfront mortgage insurance premium (1.75% of loan amount)
• Property must meet FHA standards
• Loan limits vary by county

Conventional Loans

Pros:

• PMI drops off at 22% equity (or 20% with request)
• No upfront mortgage insurance premium
• Higher loan limits
• More property types accepted
• Potentially lower overall cost with good credit

Cons:

• Typically requires higher credit score (620+ minimum)
• Often requires 3-5% down minimum
• Stricter debt-to-income requirements
• Less flexibility with credit issues

Which Should You Choose?

Choose FHA if:

• Your credit score is below 650
• You have limited down payment savings
• Your debt-to-income ratio is higher
• You’re buying below FHA loan limits

Choose Conventional if:

• Your credit score is 680+
• You can put down 5-20%
• You plan to build equity quickly
• You’re buying above FHA limits

Let’s Run the Numbers

Every situation is unique. I work with lenders who can provide side-by-side comparisons showing your actual monthly payment and total cost under each scenario.