Comparison
FHA vs. Conventional Loans
Two of the most popular mortgage options — but they work very differently. This guide breaks down the key differences so you can choose the right fit for your financial situation.
The Basics: What Makes Them Different
FHA loans are insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Because the government insures the loan against default, lenders can offer more flexible qualification requirements — lower credit scores, higher debt-to-income ratios, and smaller down payments.
Conventional loans are not backed by a government agency. They conform to guidelines set by Fannie Mae and Freddie Mac (the government-sponsored enterprises that purchase most mortgages). Because there is no government insurance, conventional loans typically require stronger credit and larger down payments — but they offer advantages in mortgage insurance flexibility and property options.
Both loan types are available for primary residences in Central Florida. Your choice depends on your credit score, savings, and long-term plans. Learn more about each program on our FHA loans page and conventional loans page.
Side-by-Side Comparison
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | 3.5% (with 580+ credit) | 3% (first-time buyers) to 5% |
| Minimum Credit Score | 580 (3.5% down) or 500 (10% down) | 620 minimum, 740+ for best rates |
| Mortgage Insurance | Upfront MIP (1.75%) + annual MIP for life of loan | PMI required if <20% down; removable at 20% equity |
| Debt-to-Income Ratio | Up to 57% with compensating factors | Typically up to 45%, sometimes 50% |
| Loan Limits (2024) | $498,257 (most FL counties) | $766,550 (conforming limit) |
| Property Types | Primary residence only; condo approval required | Primary, second home, or investment property |
| Seller Concessions | Up to 6% of purchase price | 3–9% depending on down payment |
Loan limits and guidelines are subject to change. Contact us for current program details specific to your situation.
Mortgage Insurance: The Key Difference
Mortgage insurance is often the deciding factor between FHA and conventional loans. Here is why it matters:
FHA Mortgage Insurance Premium (MIP): FHA loans require an upfront MIP of 1.75% of the loan amount (which can be financed into the loan) plus an annual MIP of 0.55% for most borrowers. For loans with less than 10% down, MIP remains for the life of the loan. For loans with 10% or more down, MIP can be removed after 11 years. The only way to eliminate FHA MIP on a low-down-payment loan is to refinance into a conventional loan once you have 20% equity.
Conventional Private Mortgage Insurance (PMI): If you put less than 20% down on a conventional loan, you will pay PMI. However, PMI is automatically removed once your loan balance reaches 78% of the original home value, and you can request removal at 80%. PMI rates vary based on credit score and down payment — borrowers with higher scores pay significantly less. You can also choose lender-paid PMI (built into the rate) or single-premium PMI (paid upfront).
For borrowers who plan to stay in the home long-term, the ability to remove PMI on a conventional loan can save thousands over the life of the mortgage compared to permanent FHA MIP.
Which Loan Is Right for You?
There is no universally better option — it depends on your specific financial profile. Here are some general guidelines:
FHA May Be Better If:
- • Your credit score is below 680
- • You have limited savings for a down payment
- • You have a higher debt-to-income ratio
- • You had a bankruptcy or foreclosure in the past few years
- • You plan to refinance once you build equity and improve credit
Conventional May Be Better If:
- • Your credit score is 700 or higher
- • You can put 10–20% or more down
- • You want to eliminate mortgage insurance eventually
- • You are buying a second home or investment property
- • The home price exceeds FHA loan limits
Many buyers qualify for both programs. In those cases, your loan officer can run the numbers on both options and show you the total cost comparison over your expected ownership period. Sometimes the answer is not obvious without running the actual figures.
Use our mortgage calculators to estimate payments, or apply for a free consultation and we will walk you through both options side by side.
Let Us Run the Numbers for You
Our loan officers can compare FHA and conventional options based on your specific situation — credit score, down payment, and goals. No cost, no obligation.
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