California decision guide · FHA vs. conventional

FHA vs. Conventional: Which Fits Your Scenario?

There is no universal winner. We compare the rules that actually change the decision—credit treatment, cash, county limits, occupancy, mortgage insurance, and how long you expect to keep the loan.

Compare both options Review market context

Educational guidance only. Current agency, investor, and lender requirements may be stricter and a complete application controls eligibility.

At a glanceCalifornia · 2026

Decision rule: Compare the full fileOne score or down-payment figure cannot pick the right program.
FHA entry path: 3.5% downAt 580+ on the minimum decision credit score (MDCS)—the middle of three scores, lower of two, with the lowest borrower’s score controlling.
Conventional paths: 3% or 5%The 3% paths carry program-specific eligibility tests.
Insurance: MIP vs. PMIDifferent pricing, duration, and cancellation systems.

01 · Answer first

The right answer depends on five facts—not a universal ranking.

FHA can fit a file that conventional does not, and conventional can fit goals FHA does not serve. The comparison becomes useful only after we connect the borrower, property and timeline.

Credit profile

FHA publishes qualifying-score tiers. Conventional automated underwriting has no published universal minimum, while manual underwriting does. A score alone does not decide either result.

Cash available

The minimum investment, gift source, seller contribution and remaining funds must be evaluated together—not reduced to one down-payment percentage.

County and unit count

HUD and FHFA publish separate 2026 county datasets. A duplex uses a different limit than a one-unit home, and FHA can be lower than conforming in the same county.

How the property will be used

FHA is a principal-residence program with limited exceptions. Conventional financing can also serve a qualifying second home or investment property.

Insurance timeline

FHA annual MIP follows its published duration rule. Conventional PMI is privately priced and may have federal original-value or investor current-value cancellation paths.

02 · Financial model

Three questions expose three different kinds of cost.

A low down payment, a low monthly obligation, and a stronger long-term position are not the same outcome. This $500,000 illustration compares the three paths a first-time buyer is most likely to weigh, then moves the less useful insurance structures behind an optional detail layer.

$500,000 California purchase · 30-year fixed · two observed credit tiers

Illustration only. Not an offer, quote, preapproval, or Loan Estimate. Figures show principal and interest plus mortgage insurance only; property taxes, homeowners insurance, HOA dues, closing costs, and other housing expenses are excluded. Conventional insurance uses sample pricing from a leading national mortgage insurer; your pricing will differ.

Choose a question

Sample credit tier

What does it cost to get in?

The 3%-down conventional path uses the least cash here at $15,000. FHA needs $17,500 upfront and finances $8,443.75 of insurance into the loan—real debt owed from day one.

Illustrated credit tier

740 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

What does it cost to get in? at the 740 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 3% down (FTHB)*	Conventional · 5% down
Cash you need upfront	FHA · 3.5% down$17,500	Conventional · 3% down (FTHB)*$15,000	Conventional · 5% down$25,000
Insurance cost in the first year	FHA · 3.5% down$11,143.94	Conventional · 3% down (FTHB)*$2,085.50	Conventional · 5% down$1,567.50
Insurance paid upfront	FHA · 3.5% down$8,443.75 financed into the loan	Conventional · 3% down (FTHB)*$0 with monthly insurance	Conventional · 5% down$0 with monthly insurance
Starting loan balance	FHA · 3.5% down$490,943.75	Conventional · 3% down (FTHB)*$485,000.00	Conventional · 5% down$475,000.00

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

*FTHB = first-time homebuyer. Fannie Mae's Standard 97 program requires at least one borrower who has not owned a home in the past three years.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 3% down (FTHB)* · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Cash you need upfront: $25,670.00
Insurance cost in year one: $10,670.00

Conventional · 3% down (FTHB)* · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Cash you need upfront: $15,000.00
Insurance cost in year one: $16,102.00

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Cash you need upfront: $32,125.00
Insurance cost in year one: $7,125.00

Conventional · 5% down · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Cash you need upfront: $25,000.00
Insurance cost in year one: $12,587.50

Lender-paid does not mean free. The lender-paid samples add about $193 per month to the 3%-down path and $229 to the 5%-down path versus monthly insurance. The cost never cancels. That higher monthly payment can also reduce qualifying room.

Illustrated credit tier

620 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

What does it cost to get in? at the 620 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 5% down
Cash you need upfront	FHA · 3.5% down$17,500	Conventional · 5% down$25,000
Insurance cost in the first year	FHA · 3.5% down$11,143.94	Conventional · 5% down$5,890.00
Insurance paid upfront	FHA · 3.5% down$8,443.75 financed into the loan	Conventional · 5% down$0 with monthly insurance
Starting loan balance	FHA · 3.5% down$490,943.75	Conventional · 5% down$475,000.00

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

This illustration compares the 5%-down conventional path at this credit tier. Higher loan-to-value requires more insurance coverage, which costs more—visible at 740, where the 3%-down path's insurance sample runs above the 5%-down path's.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Cash you need upfront: $57,632.50
Insurance cost in year one: $32,632.50

Conventional · 5% down · lender-paid insurance

Not offered at this credit tier—the sample premium was too large for a permissible rate to absorb.

Not offered—not a $0 option.

Lender-paid does not mean free. It was not offered in the 620 sample because the premium was too large for a permissible rate to absorb. An unavailable option is never displayed as a zero-cost option.

What does it cost each month?

The 5%-down conventional path has the lowest monthly figure here. The extra $10,000 down lowers the modeled payment by about $106 per month—about 12.8% of that extra cash over one year in this illustration; the illustrated note rate itself does not improve.

Illustrated credit tier

740 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

What does it cost each month? at the 740 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 3% down (FTHB)*	Conventional · 5% down
Total monthly payment (P&I + mortgage insurance)	FHA · 3.5% down$3,168.47	Conventional · 3% down (FTHB)*$3,239.32	Conventional · 5% down$3,132.95
Principal and interest	FHA · 3.5% down$2,943.46	Conventional · 3% down (FTHB)*$3,065.53	Conventional · 5% down$3,002.32
Starting monthly insurance	FHA · 3.5% down$225.02	Conventional · 3% down (FTHB)*$173.79	Conventional · 5% down$130.63
Illustrative note rate	FHA · 3.5% down6.000%	Conventional · 3% down (FTHB)*6.500%	Conventional · 5% down6.500%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

*FTHB = first-time homebuyer. Fannie Mae's Standard 97 program requires at least one borrower who has not owned a home in the past three years.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 3% down (FTHB)* · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Total monthly payment (P&I + mortgage insurance): $3,065.53
Illustrative note rate: 6.500%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Conventional · 3% down (FTHB)* · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Total monthly payment (P&I + mortgage insurance): $3,432.80
Illustrative note rate: 7.625%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Total monthly payment (P&I + mortgage insurance): $3,002.32
Illustrative note rate: 6.500%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Conventional · 5% down · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Total monthly payment (P&I + mortgage insurance): $3,362.02
Illustrative note rate: 7.625%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Illustrated credit tier

620 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

What does it cost each month? at the 620 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 5% down
Total monthly payment (P&I + mortgage insurance)	FHA · 3.5% down$3,208.04	Conventional · 5% down$3,651.02
Principal and interest	FHA · 3.5% down$2,983.03	Conventional · 5% down$3,160.19
Starting monthly insurance	FHA · 3.5% down$225.02	Conventional · 5% down$490.83
Illustrative note rate	FHA · 3.5% down6.125%	Conventional · 5% down7.000%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Total monthly payment (P&I + mortgage insurance): $3,160.19
Illustrative note rate: 7.000%

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Conventional · 5% down · lender-paid insurance

Not offered at this credit tier—the sample premium was too large for a permissible rate to absorb.

Not offered—not a $0 option.

Two observed tiers · no guessed midpoint

Credit changes the conventional sample much more.

Conventional · 5% down: about $518 more per month between the two samples because both the rate and monthly insurance increase.

FHA · 3.5% down: about $40 more per month; the federal insurance percentage is unchanged between these credit tiers.

Between these two tiers the gap narrows—that is where pricing both paths matters most. Two samples do not prove an exact crossover score.

Which builds my wealth?

At 740, the 3%-down conventional path is $643 ahead after five years even if its monthly insurance remains. If that insurance ends in month 36, its modeled five-year edge grows to $4,814. The 5%-down path's larger modeled edge starts with $7,500 more cash at closing than FHA.

Illustrated credit tier

740 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

Which builds my wealth? at the 740 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 3% down (FTHB)*	Conventional · 5% down
Down payment at the start	FHA · 3.5% down$17,500	Conventional · 3% down (FTHB)*$15,000	Conventional · 5% down$25,000
Loan balance after 5 years	FHA · 3.5% down$456,845	Conventional · 3% down (FTHB)*$454,013	Conventional · 5% down$444,652
Your equity position after 5 years	FHA · 3.5% down$43,155	Conventional · 3% down (FTHB)*$45,987	Conventional · 5% down$55,348
Five-year total position · insurance stays	FHA · 3.5% downReference path	Conventional · 3% down (FTHB)*$643 ahead of FHA	Conventional · 5% down$6,386 ahead of FHA
Five-year total position · insurance ends in month 36	FHA · 3.5% downReference path	Conventional · 3% down (FTHB)*$4,814 ahead of FHA	Conventional · 5% down$9,521 ahead of FHA

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

*FTHB = first-time homebuyer. Fannie Mae's Standard 97 program requires at least one borrower who has not owned a home in the past three years.

After 3 years · 3% down vs. FHA

Insurance stays: $3,895 ahead of FHA
Ends in month 36: $3,895 ahead of FHA

After 5 years · 3% down vs. FHA

Insurance stays: $643 ahead of FHA
Ends in month 36: $4,814 ahead of FHA

After 10 years · 3% down vs. FHA

Insurance stays: FHA $8,282 ahead
Ends in month 36: $6,316 ahead of FHA

The total-position rows combine payment differences, starting down payment, and remaining loan balances. They hold the home value at $500,000 and exclude appreciation itself, transaction costs, tax effects, and any refinance costs. Month 36 is an illustration—not a promised cancellation date.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 3% down (FTHB)* · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Starting cash: $25,670.00
Insurance can cancel: No

Conventional · 3% down (FTHB)* · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Starting cash: $15,000.00
Insurance can cancel: No

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Starting cash: $32,125.00
Insurance can cancel: No

Conventional · 5% down · lender-paid insurance

The lender absorbs the premium through the illustrated rate; the cost starts on day one and never cancels.

Starting cash: $25,000.00
Insurance can cancel: No

Illustrated credit tier

620 credit score

A score is one input, not an approval. Property, income, debts, reserves, insurer, lender and investor rules still apply.

Which builds my wealth? at the 620 illustrated credit tier
What to compare	FHA · 3.5% down	Conventional · 5% down
Down payment at the start	FHA · 3.5% down$17,500	Conventional · 5% down$25,000
Loan balance after 5 years	FHA · 3.5% down$457,545	Conventional · 5% down$447,125
Your equity position after 5 years	FHA · 3.5% down$42,455	Conventional · 5% down$52,875
Five-year total position · insurance stays	FHA · 3.5% downReference path	Conventional · 5% downFHA $24,087 ahead
Five-year total position · insurance ends in month 36	FHA · 3.5% downReference path	Conventional · 5% downFHA $12,307 ahead

Principal, interest, and mortgage insurance only. Property taxes, homeowners insurance, HOA dues, and closing costs are not included.

Other ways to pay for the insurance (usually not better — here's why)

Conventional · 5% down · insurance paid upfront

Paid at closing instead of monthly; the paid premium does not later cancel.

Starting cash: $57,632.50
Insurance can cancel: No

Conventional · 5% down · lender-paid insurance

Not offered at this credit tier—the sample premium was too large for a permissible rate to absorb.

Not offered—not a $0 option.

03 · The core comparison

Put the rule systems side by side.

The table separates agency program rules from lender decisions and keeps the conditions attached. Your complete file still determines whether either option fits.

FHA and conventional loan comparison by decision factor
Decision factor	FHA	Conventional
Minimum down payment	FHA3.5% with a qualifying score of 580+; 10% at 500–579 under FHA’s agency rules. HUD	ConventionalStandard 97 may begin at 3% for an eligible first-time buyer; the broader standard path begins at 5%. Standard 97 excludes high-balance loans. Fannie
Credit score treatment	FHAYour qualifying score is the median of three, lower of two, or only score. With multiple borrowers, the lowest borrower’s qualifying score controls. Lender rules may be stricter.	ConventionalFannie Mae states: “A minimum credit score is not required for DU loan casefiles.” Manual minimums are 620 fixed / 640 ARM. Guide
Mortgage insurance structure	FHA1.75% UFMIP plus annual MIP based on term, base loan and original LTV. UFMIP is fully financed or fully paid—not partly financed.	ConventionalPrivate mortgage insurance is risk-priced for the actual scenario, so your cost comes from a quote rather than one universal percentage.
Can insurance end?	FHAOriginal LTV at or below 90%: annual MIP for 11 years. Above 90%: annual MIP for the mortgage term. Schedule	ConventionalHPA: borrower request at 80% of original value, automatic termination at scheduled 78% if current, and final termination at the amortization midpoint. Investor current-value paths are separate. Law
2026 loan limits	FHAHUD county and unit-count limits. California one-unit figures range from $541,287 to $1,249,125.	ConventionalFHFA county and unit-count limits. California’s $832,750 baseline and $1,249,125 ceiling have seven intermediate counties between them.
Occupancy	FHAPrincipal residence, generally occupied within 60 days with intent to remain at least one year; limited exceptions apply.	ConventionalPrincipal residence, qualifying second home, or investment property under the applicable rules. Guide
Seller contributions	FHAUp to 6% of sales price for permitted costs; never the 3.5% minimum required investment. Excess reduces the price used for LTV.	ConventionalPrimary/second home: 3% above 90% LTV, 6% at 75.01%–90%, 9% at 75% or below; investment property: 2%. Guide
Gift funds	FHAFive published donor classes, including family, employer/labor union, documented close friend, charity, or government/public assistance entity; cash on hand is prohibited.	ConventionalEligible relationships include family and the February 2026 familial-like or mentorship expansion. Personal gifts are not permitted for investment-property funds. Guide
DTI approach	FHAManual starting ratios are 31% / 43%, with documented compensating-factor steps through 40% / 50%. TOTAL Scorecard has no published fixed maximum.	ConventionalDU permits up to 50%. Manual starts at 36% and may reach 45% under the current Eligibility Matrix; the applicable matrix combination must be confirmed for the file.
Assumability	FHAYes, subject to purchaser credit approval, occupancy and the formal seller-release process.	ConventionalThe cited Fannie Mae guide states fixed-rate conventional mortgages are not assumable.

These are the agencies’ program rules. Your lender or investor may require more for your file. Read the full FHA guide and conventional guide for the conditions behind each row.

04 · 2026 county tool

Compare both official limits for the same county.

HUD and FHFA use separate mortgage limits. Choose a unit count and county to compare the two programs. Start with California counties, or search any U.S. county when you need a different location.

Search any of 3,235 U.S. counties and county equivalents.

Showing 10 of 58 California counties

2026 FHA and conventional county limits for California counties
County	Conventional 2026	FHA 2026	Higher published limit
Alameda	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Alpine	Conventional 2026$832,750	FHA 2026$736,000	Higher published limitConventional by $96,750
Amador	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Butte	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Calaveras	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Colusa	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Contra Costa	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Del Norte	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
El Dorado	Conventional 2026$832,750	FHA 2026$764,750	Higher published limitConventional by $68,000
Fresno	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Glenn	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Humboldt	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Imperial	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Inyo	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Kern	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Kings	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Lake	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Lassen	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Los Angeles	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Madera	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Marin	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Mariposa	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Mendocino	Conventional 2026$832,750	FHA 2026$546,250	Higher published limitConventional by $286,500
Merced	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Modoc	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Mono	Conventional 2026$832,750	FHA 2026$776,250	Higher published limitConventional by $56,500
Monterey	Conventional 2026$994,750	FHA 2026$994,750	Higher published limitSame published limit
Napa	Conventional 2026$1,017,750	FHA 2026$1,017,750	Higher published limitSame published limit
Nevada	Conventional 2026$832,750	FHA 2026$649,750	Higher published limitConventional by $183,000
Orange	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Placer	Conventional 2026$832,750	FHA 2026$764,750	Higher published limitConventional by $68,000
Plumas	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Riverside	Conventional 2026$832,750	FHA 2026$690,000	Higher published limitConventional by $142,750
Sacramento	Conventional 2026$832,750	FHA 2026$764,750	Higher published limitConventional by $68,000
San Benito	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
San Bernardino	Conventional 2026$832,750	FHA 2026$690,000	Higher published limitConventional by $142,750
San Diego	Conventional 2026$1,104,000	FHA 2026$1,104,000	Higher published limitSame published limit
San Francisco	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
San Joaquin	Conventional 2026$832,750	FHA 2026$678,500	Higher published limitConventional by $154,250
San Luis Obispo	Conventional 2026$1,000,500	FHA 2026$1,000,500	Higher published limitSame published limit
San Mateo	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Santa Barbara	Conventional 2026$941,850	FHA 2026$941,850	Higher published limitSame published limit
Santa Clara	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Santa Cruz	Conventional 2026$1,249,125	FHA 2026$1,249,125	Higher published limitSame published limit
Shasta	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Sierra	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Siskiyou	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Solano	Conventional 2026$832,750	FHA 2026$685,400	Higher published limitConventional by $147,350
Sonoma	Conventional 2026$897,000	FHA 2026$897,000	Higher published limitSame published limit
Stanislaus	Conventional 2026$832,750	FHA 2026$545,100	Higher published limitConventional by $287,650
Sutter	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Tehama	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Trinity	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Tulare	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Tuolumne	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463
Ventura	Conventional 2026$1,035,000	FHA 2026$1,035,000	Higher published limitSame published limit
Yolo	Conventional 2026$832,750	FHA 2026$764,750	Higher published limitConventional by $68,000
Yuba	Conventional 2026$832,750	FHA 2026$541,287	Higher published limitConventional by $291,463

A county limit is an agency program ceiling, not an approval amount or purchase-price cap. Property type, complete underwriting, lender and investor rules still control.

The comparison uses the official 2026 FHFA and HUD county limits. FHFA HUD

05 · Insurance math

FHA is published math. Conventional PMI requires a quote.

That asymmetry is the honest comparison. FHA publishes its upfront charge and annual tiers. A real quote provides the conventional PMI cost; a broad unsourced range would not tell you what your file costs.

FHA · published schedule

Three inputs select the annual MIP tier.

1.75% UFMIP is calculated on the base mortgage and may be fully financed or fully paid in cash.

Annual MIP then uses mortgage term, base loan amount, and original LTV. Duration is 11 years at 90% LTV or below and the mortgage term above 90%.

The complete current schedule spans 15 to 75 basis points. This is FHA MIP—not a conventional PMI estimate. Appendix 1.0

Conventional · private pricing

“PMI requires a quote” is the complete dollar answer here.

Private mortgage insurance depends on the real borrower, property, loan structure, insurer and current pricing. Those inputs make an actual quote more useful than a universal cost range.

What is published is the federal exit framework: request at 80% of original value with conditions, automatic scheduled termination at 78% if current, and final termination at midpoint.

An investor’s current-value cancellation path can use a new valuation and separate tests. It is not the same HPA right. CFPB

California threshold worth checking

FHA’s annual-MIP amount threshold remains $726,200.

For a more-than-15-year, above-95%-LTV mortgage, a base loan at or below $726,200 uses 55 basis points; above it uses 75. The $820,250 base loan in the larger-loan illustration below creates about $1,640.50 more annual MIP than the 55-basis-point band, or roughly $136.71 per month. That isolates the tier difference only; it is not a payment quote.

06 · Scenario fit

Use tendencies as questions, not promises.

These lists come directly from the comparison rows. A tendency can identify what to test first; only the complete review can select a program.

FHA tends to deserve a closer look when…

The borrower needs FHA’s published 500–579 or 580+ qualifying-score framework evaluated and understands that lender rules can be stricter.
A 3.5% minimum investment and documented FHA gift sources fit the available cash plan.
The home will be a principal residence and the correct FHA county/unit limit covers the requested base loan.
The buyer understands UFMIP, the annual-MIP tier, and whether the 11-year or term-long duration applies.
Assumability under future credit, occupancy and release rules matters to the long-term plan.

Conventional tends to deserve a closer look when…

DU’s complete automated assessment is more useful than treating 620 as a universal cutoff.
A qualifying second home or investment property—not an FHA principal residence—is the goal.
The county’s conforming limit is higher than its FHA limit or the Standard 97 high-balance restriction changes the low-down-payment path.
The borrower wants to evaluate HPA and investor PMI-cancellation paths rather than FHA’s published MIP duration.
The conventional seller-contribution, gift, property-count and occupancy rules better match the transaction.

The switch-later path is a new qualification, not a promise.

A borrower may later refinance an FHA mortgage into a conventional loan to pursue a different insurance structure. The new refinance must qualify under then-current credit, income, debt, value, equity, costs, program and market conditions. It can be a plan to evaluate—not a guaranteed exit.

07 · Same-house illustrations

Compare the dollars shown here, then use a real quote for PMI.

These examples use a 3.5%-down FHA path and a 5%-down conventional path. They compare down payment and FHA insurance only; they are not a full payment or qualification result. Interest rate, principal and interest, taxes, homeowners insurance, closing costs and total payment depend on the actual scenario.

Lower-price illustration

$550,000 purchase

FHA · 3.5% down

Down payment: $19,250
Base mortgage: $530,750
1.75% UFMIP: $9,288.13
Fully financed balance: $540,038.13
Monthly MIP portion: $243.26

Above 95% LTV · more than 15 years · 55 bps. Illustrative FHA arithmetic only.

Conventional · 5% down

Down payment: $27,500
Base mortgage: $522,500
PMI: Actual quote required

The standard 5% path is illustrative. Program, county, occupancy and underwriting still apply.

Higher-price illustration

$850,000 purchase

FHA · 3.5% down

Down payment: $29,750
Base mortgage: $820,250
1.75% UFMIP: $14,354.38
Fully financed balance: $834,604.38
Monthly MIP portion: $512.66

Above 95% LTV · more than 15 years · 75 bps. Illustrative FHA arithmetic only.

Conventional · 5% down

Down payment: $42,500
Base mortgage: $807,500
PMI: Actual quote required

The standard 5% path is illustrative. Program, county, occupancy and underwriting still apply.

At $550,000, an eligible Standard 97 path would use a $16,500 down payment, but it carries its first-time-buyer, fixed-rate, one-unit primary-residence and no-high-balance rules. That is why a smaller percentage cannot be detached from the program conditions.

08 · Frequently asked

Decision questions that deserve conditions—not slogans.

These answers keep the conditions close to the question, so you can compare the programs without reducing either one to a slogan.

Which is easier to qualify for: FHA or conventional?

Neither label guarantees an easier approval. FHA publishes lower qualifying-score entry tiers, while conventional DU does not use one universal minimum score. Income, debts, cash, occupancy, property, automated findings, lender and investor rules still control the complete decision.

Can I switch from FHA to conventional later?

Possibly, through a new refinance. The new conventional loan must qualify under the rules, value, credit, income, debt, costs and market conditions in effect then. Refinancing is not an automatic MIP exit and can carry closing costs.

Why did another lender tell me conventional requires 620?

That may be the lender’s own requirement or shorthand for manual underwriting. Fannie Mae’s April 22, 2026 guide says DU casefiles have no required minimum score; manual fixed-rate files have a 620 minimum and manual ARMs have 640. Investors may be stricter.

Do FHA and conventional loans both have mortgage insurance?

FHA uses an upfront premium and an annual premium under a published federal schedule. Conventional loans above the applicable LTV threshold generally use private mortgage insurance. Private PMI is priced for the actual scenario, so a real quote—not one universal percentage—shows the cost.

Are FHA loans assumable?

Yes, under the applicable credit, occupancy and release rules. A buyer does not simply take over without review. The cited conventional guide says fixed-rate conventional mortgages are not assumable.

Can I use FHA or conventional financing for a duplex?

Either can be possible for an eligible two-unit property. FHA generally requires the borrower to occupy the property as a principal residence. Conventional treatment depends on whether it is a primary residence or an investment and on the applicable underwriting, funds and property rules. Use the two-unit county limit—not the one-unit figure.

09 · Next step · low commitment

Compare the same facts under both programs.

Bring the county, unit count, occupancy, estimated price, available funds, credit profiles, debts and expected holding period. We can help organize the questions for both current paths without presenting this guide as an approval or price quote.

Want the underlying detail first? Read the FHA guide, the conventional guide, or the mortgage market trends guide.

Compare my options

Sources (11) — the official documents behind every figure on this page

This page provides general education, not an offer, approval, commitment to lend, or complete statement of any program. Agency guidance can change, and investor or lender requirements may be stricter. Eligibility, costs, terms, and available programs depend on a complete application and current rules.