What credit score should I have to choose conventional over FHA?

At 680 or above, conventional starts becoming cheaper than FHA over the life of the loan. Between 680 and 700 the decision is close and depends on your down payment. Above 700, conventional is almost always cheaper. Below 620, FHA is your only realistic option.

What is the difference between MIP and PMI?

MIP is the FHA's mortgage insurance premium. It has two pieces: an upfront fee of 1.75 percent of the loan amount (rolled into the loan) and an annual fee of 0.55 percent for most borrowers. PMI is private mortgage insurance on conventional loans with less than 20 percent down. It ranges from 0.15 to 1.5 percent annually and can be removed once you reach 20 percent equity. The biggest difference is that FHA MIP sticks for the life of the loan unless you put 10 percent or more down, while PMI is temporary.

Is conventional 97 a real thing?

Yes. Fannie Mae's Conventional 97 and Freddie Mac's Home Possible programs let first-time buyers put down as little as 3 percent. With a credit score of 680+, Conventional 97 often beats FHA because PMI is removable and no upfront premium is rolled into the loan balance.

Can I remove FHA mortgage insurance?

Only by putting 10 percent or more down at origination (in which case MIP drops off after 11 years) or by refinancing into a conventional loan once you have 20 percent equity. On a standard FHA loan with less than 10 percent down, MIP lasts the entire life of the loan, which is the single biggest long-term cost of FHA.

When is FHA actually the smarter choice?

FHA is the smarter choice when your credit score is below 680, you have a limited down payment (under 5 percent), or you are planning to refinance out within 3 to 5 years once your credit score improves. FHA's easier underwriting and lower rate floor at sub-680 scores offset its higher mortgage insurance costs in those cases.

How much more expensive is FHA over 30 years for a 700-credit buyer?

For a buyer with a 700 credit score putting 5 percent down on a $350,000 home, FHA is typically $30,000 to $70,000 more expensive than a conventional loan over 30 years. The gap is driven almost entirely by the permanent nature of MIP. Break-even analysis favors conventional as soon as credit scores cross 680.

Will lenders recommend one over the other?

Many lenders will recommend FHA because it's easier to close and they still earn on the transaction. Conventional requires tighter underwriting, so some lenders push FHA even when the borrower qualifies for conventional. Always run both options side-by-side, not the one the loan officer mentions first.

FHA vs Conventional Loan in 2026: Which Is Actually Cheaper

Most first-time buyers end up in an FHA loan because it is the path of least resistance: the down payment is lower, the underwriting is softer, and the loan officer mentions it first. Over 30 years, that default often costs $30,000 to $70,000 more than a conventional loan would have on the exact same house. The real question is not "can I get approved?" It is "which loan is cheaper for my specific credit score and down payment?"

This guide runs the actual 2026 numbers: monthly payments, total interest, mortgage insurance, and the 30-year total cost for both FHA and conventional loans across four buyer profiles. The key finding, consistent across Bankrate's 2026 rate data (Bankrate), Amerisave's January 2026 FHA vs conventional breakdown (Amerisave), and Altitude Home Loans' in-depth comparison (Altitude Home Loans): the tipping point is somewhere between a 680 and 700 credit score. Below it, FHA wins. Above it, conventional wins. Almost every time.

The quick answer

If you have 30 seconds, here is the decision tree:

Credit score 580 to 620: FHA is your only practical option.
Credit score 620 to 680: FHA usually cheaper. Conventional works but rates are higher.
Credit score 680 to 720: The tipping point. Run both numbers.
Credit score 720+: Conventional is almost always cheaper, especially with 5 percent or more down.

If you are still in the "improve my credit score" phase before applying, our affordability breakdown will help you time the purchase right. A 30-point credit score bump can change your 30-year cost by $50,000.

What an FHA loan actually is

FHA loans are insured by the Federal Housing Administration. The loan is issued by a regular bank or lender, but the FHA guarantees it, which is why lenders accept lower credit scores and smaller down payments. In exchange for that guarantee, every FHA borrower pays mortgage insurance premiums (MIP):

Upfront MIP: 1.75 percent of the loan amount, typically rolled into the loan balance at closing.
Annual MIP: 0.55 percent for most borrowers, paid monthly as part of your mortgage payment.
Duration: MIP lasts the entire life of the loan if your down payment is under 10 percent. With 10 percent or more down, MIP drops off after 11 years.

Credit score minimum: 580 with 3.5 percent down, or 500 with 10 percent down (though lenders rarely accept this). Debt-to-income ratio cap is typically 43 to 50 percent, compared to 43 to 45 percent for conventional.

What a conventional loan actually is

Conventional loans are not government-backed. They are originated and held (or sold to Fannie Mae and Freddie Mac) by private lenders. Credit score minimums are higher (typically 620+, with best rates starting at 740+), but the mortgage insurance is far more favorable:

PMI (Private Mortgage Insurance): Required only when down payment is less than 20 percent.
Cost: Ranges from 0.15 to 1.5 percent annually, based on credit score and down payment. For a 720-credit buyer with 5 percent down, expect roughly 0.5 to 0.8 percent.
Duration: Removable once you reach 20 percent equity, either through payments or home value appreciation. This is the biggest structural advantage of conventional.
No upfront mortgage insurance fee.

A lesser-known program is Conventional 97, Fannie Mae's 3-percent-down option for first-time buyers (or Home Possible from Freddie Mac). At a 700+ credit score, Conventional 97 often beats FHA head-to-head because it has no upfront MIP and its PMI is removable.

The four-profile cost comparison

Here are four realistic 2026 buyer profiles for a $350,000 home purchase. Rates pulled from Bankrate and Mortgage-Info's January 2026 averages, with MIP and PMI applied to their standard rates.

Profile 1 — 640 credit, 3.5 percent down

FHA wins decisively

FHA: 6.75% rate, $1,785/mo principal+interest, $155/mo MIP. 30-year total cost: ~$690,000.
Conventional: 7.25% rate, $1,902/mo PI, $230/mo PMI. 30-year total cost: ~$735,000 (PMI removes at year 10).
Savings with FHA: ~$20,000 over 30 years.

Profile 2 — 680 credit, 5 percent down

Basically a tie, conventional edges out

FHA: 6.60% rate, $1,760/mo PI, $150/mo MIP. 30-year total: ~$675,000.
Conventional 97: 6.85% rate, $1,805/mo PI, $140/mo PMI. 30-year total: ~$665,000 (PMI removes at year 8).
Conventional wins by ~$10,000 over 30 years. Close call.

Profile 3 — 720 credit, 5 percent down

Conventional wins by a lot

FHA: 6.50% rate, $1,735/mo PI, $150/mo MIP. 30-year total: ~$665,000.
Conventional 97: 6.50% rate, $1,735/mo PI, $90/mo PMI. 30-year total: ~$620,000 (PMI removes at year 7).
Conventional wins by ~$45,000 over 30 years.

Profile 4 — 760 credit, 10 percent down

Conventional blowout

FHA: 6.40% rate, $1,650/mo PI, $140/mo MIP (drops off year 11). 30-year total: ~$640,000.
Conventional: 6.30% rate, $1,640/mo PI, $55/mo PMI (removes year 5). 30-year total: ~$585,000.
Conventional wins by ~$55,000 over 30 years.

The cost gap at 720+ credit is not subtle. It is the cost of a new car, or an entire emergency fund, or college tuition for a kid. This is why the loan officer matters: an honest one will run both and show you the comparison. One who only shows you FHA is either limited or not optimizing for you.

MIP vs PMI: the real structural difference

The monthly cost of mortgage insurance is close enough between FHA and conventional that it does not swing the decision. What swings the decision is the duration and removability.

	FHA (MIP)	Conventional (PMI)
Upfront fee	1.75% of loan	None
Annual rate	0.55%	0.15 to 1.5%
Removable?	Only by refinancing (if <10% down)	Yes, at 20% equity
Duration (3-9% down)	Life of loan	Until 20% equity
Duration (10%+ down)	11 years	Until 20% equity

On a 30-year FHA loan with less than 10 percent down, you will pay MIP for 360 months. That is $150 to $250 a month for 30 years, or $54,000 to $90,000 in mortgage insurance alone. A conventional PMI payment on the same house typically disappears by year 7 to 12, which is where the $30,000 to $70,000 lifetime cost gap comes from.

When FHA is genuinely the right call

FHA gets unfairly dismissed in some comparisons. It is legitimately the better option in these cases:

Credit score below 680. The interest rate discount from FHA's government guarantee outweighs the higher MIP cost at this band.
Down payment under 5 percent. FHA's 3.5 percent down minimum with softer underwriting beats Conventional 97 below a 680 credit.
Planning to refinance within 3 to 5 years. If you expect your credit to improve meaningfully (paying down debt, correcting reporting errors), you can start with FHA and refinance into conventional once you hit 680+.
High DTI ratio. FHA allows 43 to 50 percent DTI vs. 43 to 45 percent for conventional. If you are on the edge, FHA may be the only approval path.
Gift funds or down payment assistance. FHA is more flexible about the source of down payment money.

When conventional is genuinely the right call

Credit score 700+. The rate advantage swings conventional.
Down payment 5 percent or more. PMI becomes cheaper than MIP.
Planning to stay in the home long-term. The removable PMI saves 20 to 30 years of mortgage insurance.
Expecting home value appreciation. Once you hit 20 percent equity (through value increase or extra principal payments), PMI drops. FHA does not.
Buying a home FHA does not approve. FHA has strict property standards. Fixer-uppers and some condo developments are FHA-ineligible.

The refinance escape hatch

One reason FHA can still be the right play even if it looks more expensive on paper: you can refinance into a conventional loan once your credit or equity improves. The typical path looks like this:

Buy with FHA at 640 credit, 3.5 percent down.
Make on-time payments for 18 to 24 months. Credit score climbs to 700+.
Home value appreciates 5 to 10 percent. Combined with principal paydown, you approach 20 percent equity.
Refinance into a conventional loan. MIP disappears. New rate usually 0.25 to 0.75 percent lower.

The refinance strategy works best when you expect meaningful credit or equity improvement in 2 to 3 years. If you plan to stay put at 640 credit indefinitely, the FHA cost is baked in and conventional was never going to be an option.

How to run the comparison yourself

Any loan officer can quote FHA and conventional side-by-side. Insist on seeing both, even if they only suggest one. Ask for the Loan Estimate (a standardized 3-page document lenders must provide) for each option. Then compare line-by-line:

Interest rate
APR (includes fees, better for true cost comparison)
Monthly principal and interest
Monthly MIP or PMI
Total monthly payment (including escrow for taxes and insurance)
Total closing costs
Total interest paid over 30 years
When mortgage insurance drops off (if applicable)

Our first-time home buyer checklist walks through every document you should compare. And if you are already past closing, the first-year homeowner survival guide covers the post-close costs that most buyers miss.

Bottom line

Run your credit score today. If it is 680 or higher, push hard for conventional with a 3 to 5 percent down payment program (Conventional 97 or Home Possible). If it is below 680, take FHA and plan to refinance into conventional in 18 to 24 months. Either way, ask for both Loan Estimates in writing, run the 30-year total cost math, and do not let a loan officer's default recommendation cost you $50,000 you did not need to spend.