How does FHA differ from conventional loans regarding down payments?

Answer: While both loan types require a minimum down payment, FHA allows for a lower down payment of 3.5%, compared to conventional loans that usually require at least 3% but can go as high as 20%.

What is the purpose of Mortgage Insurance Premium (MIP) for FHA loans?

Answer: FHA MIP serves as insurance for the lender against default by the borrower. The upfront MIP (UFMIP) of 1.75% is paid at closing, and an annual MIP continues to be charged throughout the life of the loan.

How does PMI for conventional loans differ based on credit score?

Answer: Conventional PMI rates are typically higher for borrowers with lower credit scores due to increased risk. The PMI rate is usually lower for those with better credit scores, as they present a lower risk of default.

What factors determine the break-even horizon for FHA vs conventional loans?

Answer: The break-even horizon refers to the time it takes for the additional costs associated with one loan type to be offset by savings on the other. It is influenced by several factors, including down payment amount, interest rates, and mortgage insurance premiums, which vary based on credit scores.

How does refinancing affect the choice between FHA and conventional loans?

Answer: Refinancing can alter the answer when comparing FHA vs conventional loans. If a borrower has built up enough equity or improved their credit score, they may be able to transition from an FHA loan with higher MIP costs to a conventional loan with lower PMI rates upon refinancing.

Can I qualify for an FHA loan if my credit score is below 620?

Answer: While it's possible to still qualify for an FHA loan with a credit score below 620, applicants may face additional challenges in getting approved due to stricter lender guidelines and potentially higher interest rates. It's essential to work with a knowledgeable lender who can assess your specific situation and help you explore alternative options if necessary.

mortgages

FHA vs Conventional Loans: Cost Breakdown by Credit Score

Justin Reynolds

August 23, 2026 2 min read

FHA Conventional Loans Mortgage Credit Score Home Buying

Key Takeaways

FHA and conventional loans have different pricing structures based on credit score.
Understand the monthly payments, financed fees, and break-even horizons for each loan type.
Use our interactive calculator to compare your costs.

How FHA and conventional price risk differently

FHA loans charge mortgage insurance premiums (MIP) for the life of the loan for most borrowers, while conventional loans typically require private mortgage insurance (PMI) only until the homeowner reaches 20% equity. However, the specifics can vary based on factors like credit score and down payment.

FHA vs. Conventional Cost Comparison by Credit Score

The cost of FHA and conventional loans differs significantly based on a borrower's credit score. Generally, individuals with lower credit scores tend to benefit more from FHA loans due to their less stringent qualification requirements.

720+: Conventional PMI is typically cheapest at this tier -- often lower than FHA's fixed MIP.

680-719: Conventional PMI and FHA MIP are often close; compare both directly.

620-679: FHA often becomes more competitive as conventional PMI rates rise with lower scores.

Below 620: FHA is usually the more accessible and often cheaper option, since conventional PMI at this tier is expensive if available at all.

Purchase Example and Calculator

Compare the costs side-by-side using our interactive calculator, which takes into account your credit score, down payment, and desired loan term to provide estimates for monthly insurance premiums, upfront fees, and refinance timelines for both FHA and conventional loans.

FHA vs. Conventional Cost Calculator

Educational estimate only -- actual MIP/PMI rates vary by lender and loan specifics.

Home price

Down payment (%)

Credit score band

FHA upfront MIP (1.75%): $5,819
FHA monthly MIP: $152/mo
Conventional monthly PMI: $208/mo
Lower monthly insurance cost at this score: FHA

Borrower Stories

Explore three real-life scenarios featuring borrowers with credit scores of 740, 690, and 640. Each story illustrates the potential advantages and tradeoffs associated with choosing an FHA or conventional loan based on their unique circumstances.

Illustrative examples, not real customer stories:

740 credit score: Conventional PMI at this tier is typically inexpensive, often making conventional the lower-cost monthly option versus FHA's fixed MIP.
690 credit score: Conventional PMI and FHA MIP costs are often close enough that the better option depends on down payment size and how long the loan will be held.
640 credit score: Conventional PMI rates rise meaningfully at this tier, often making FHA's fixed MIP the more predictable, sometimes cheaper, monthly option.

Disclosure

Please note that all figures provided are illustrative and subject to variation depending on your lender's pricing, eligibility criteria, insurance duration, refinance rules, and other factors. Always consult with your lender or agency for personalized guidance.

FAQs

Find answers to common questions about FHA vs conventional loans, including when FHA might be cheaper at certain credit scores, how long mortgage insurance lasts, and the best times to refinance out of an FHA loan.

FAQ

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