Key Differences Between FHA and Conventional Loans

Conventional loans aren’t backed by the government and tend to have more stringent credit score requirements. They offer lower long-term costs and higher loan limits compared to FHA loans.

FHA loans are guaranteed by the Federal Housing Administration (FHA) and are designed for buyers with less secure credit or smaller down payments. While more qualifying, they have mortgage insurance for the life of the loan unless refinanced.

Credit Score and Down Payment Requirements

Conventional loans require a 620 credit score, but 700+ qualifies for the best interest rates. The minimum down payment is 3%, but 20% down eliminates private mortgage insurance (PMI).

FHA loans allow buyers to qualify with a 500 credit score if they can put 10% down. Buyers with a 580+ credit score can qualify with a 3.5% down payment, a less expensive option for buyers with poor credit.

Mortgage Insurance and Loan Limits

Conventional loans require PMI if the down payment is less than 20%, but this can be dropped once enough home equity is built up.

FHA loans do require Mortgage Insurance Premium (MIP), which continues for the life of the loan unless refinanced.

Loan limits are updated for 2025. The Federal Housing Finance Agency (FHFA) has set new conforming loan limits, which are the maximum amounts that can be borrowed via conventional loans before the loans are considered jumbo loans. You can check the FHFA official 2025 loan limits page for the updated amounts.

Which Loan Is Best for You?

Choose a conventional loan if you have a higher credit score (620 and above) and can afford a larger down payment. It carries lower long-term expenses and higher borrowing limits.

Choose the FHA loan if you have a lower credit score or a smaller down payment. It has more relaxed qualification requirements but carries mortgage insurance that lasts for the life of the loan.

(research based information- values with change based on differing factors)