FHA vs conventional:
how to actually choose.
The brochure answer is 'FHA for lower credit, conventional for higher.' The real answer is a mortgage-insurance calculation - and it changes as your profile does.
By Dawn M. Muñoz · Stonehaven Lending · Updated August 13, 2026
Broadly: FHA wins for smaller down payments and credit histories that conventional pricing punishes - as little as 3.5% down for qualifying credit - in exchange for FHA mortgage insurance premiums that, on most loans, run for the life of the loan. Conventional wins when your credit and down payment earn private mortgage insurance cheap enough to beat FHA's - and PMI cancels as equity grows, which FHA's usually doesn't. The decision is arithmetic on your actual file, not a rule of thumb.
Two kinds of mortgage insurance.
Both programs charge for low down payments; they just charge differently. FHA collects an upfront premium (usually financed) plus a monthly premium that, for most borrowers today, lasts as long as the loan does. Conventional PMI is priced on your credit and down payment - expensive for weaker profiles, cheap for strong ones - and it can be removed once your equity crosses the required thresholds.
That cancellation difference is the sleeper: two loans with similar payments in year one can diverge sharply by year seven, when the conventional borrower has dropped PMI and the FHA borrower is still paying premiums or refinancing to escape them.
The accessibility case, honestly.
Credit events that conventional guidelines punish for years, FHA treats more forgivingly. Thin credit, higher debt ratios with compensating factors, gift funds for the down payment - FHA's whole design is reachability. If conventional PMI pricing for your profile comes back heavy, FHA's flat-priced premiums can genuinely be the cheaper monthly - and the only realistic path to owning this year rather than in three.
The strong-file case.
Solid credit and 10–20% down usually make conventional the better math: cheaper or no mortgage insurance, no upfront premium, more flexibility on property types and occupancy, and no FHA appraisal condition standards to navigate. At 20% down, conventional carries no monthly mortgage insurance at all - the comparison usually ends there.
Choose with the exit in mind.
Plenty of buyers correctly start FHA and later refinance into conventional once equity and credit allow, shedding the premium. That's a fine plan - if it's a plan, priced from day one, rather than a surprise in year six. When we run this comparison we model both paths over your realistic horizon: payment today, cost over five years, and what has to be true for the refinance exit to work. Run your own numbers in the mortgage calculator, then let a specialist price both against live guidelines.
Get the comparison priced on your actual profile.
A specialist runs FHA and conventional side by side against current guidelines and replies personally within one business day.