FHA vs. conventional: the first-time buyer math
Ask five people which loan a first-time buyer should get and you'll hear five confident wrong answers. The truth is boring and useful: FHA and conventional each win for a specific borrower profile, and a ten-minute comparison against your numbers settles it.
Where FHA wins
FHA exists to widen the door. Credit scores conventional pricing punishes, debt-to-income ratios conventional guidelines refuse, recent credit events that need more forgiveness — FHA absorbs all three better. Down payments start at 3.5%, and sellers can contribute generously toward closing costs.
Where conventional wins
Strong credit changes everything. Conventional mortgage insurance is priced by credit score — excellent credit means cheap insurance, and it cancels once you have enough equity. FHA's insurance is one price for everyone and, with minimum down, lasts the life of the loan. For a 740+ borrower, conventional is usually the cheaper decade even when the FHA rate looks lower on day one.
The comparison that actually decides it
- Total monthly payment — including each program's insurance, not just rate
- Cash to close — down payment plus costs, after any seller credits
- The exit — when insurance drops (conventional) or how you'd refinance out (FHA)
- Approval reality — which program actually says yes to your file
One nuance for CA and FL condo buyers: the building must qualify too, and FHA condo approval lists are narrower — sometimes the building chooses your program for you.
Want both run against your real numbers? Start the 3-minute Financing Discovery — Sam prepares the side-by-side before your first call. Or start your application (1003) →
FHA vs. conventional FAQs
Is FHA or conventional better for first-time buyers?
Neither is universally better. FHA is generally friendlier to lower credit scores and higher debt ratios; conventional can be cheaper long-term for stronger credit profiles because its mortgage insurance cancels. The right answer comes from running both against your actual numbers.
What is the minimum down payment for FHA vs. conventional?
FHA requires as little as 3.5 percent down with qualifying credit. Conventional programs start at 3 percent for eligible first-time buyers. Down payment is rarely the deciding factor — mortgage insurance treatment and credit pricing usually matter more.
Can I remove mortgage insurance later?
On conventional loans, monthly mortgage insurance can be removed once you reach sufficient equity. On most FHA loans with minimum down payment, the insurance lasts for the life of the loan — refinancing into conventional later is the common exit.