FHA vs. Conventional Calculator
Compare the full monthly payment on an FHA loan and a conventional loan, including mortgage insurance, for your credit score and down payment.
FHA or Conventional: Which Loan Costs Less?
FHA and conventional loans both allow low down payments, but they price mortgage insurance very differently. FHA charges an upfront premium of 1.75% of the loan, usually financed, plus a yearly premium that is the same for every credit score. Conventional loans have no upfront premium, and the monthly mortgage insurance depends heavily on your credit score and down payment.
That is why the answer changes from one borrower to the next. With strong credit, conventional usually wins, and its mortgage insurance drops off once you have enough equity. With a lower score or a small down payment, FHA often has the lower payment, though its mortgage insurance usually stays for the life of the loan.
Example: On a $500,000 home with 5% down and a credit score between 700 and 719, the conventional payment is about $3,311 a month with mortgage insurance at 6.5%. The FHA payment is about $3,138 at 6.125%. With a 760 score, the conventional mortgage insurance falls by more than half and the gap narrows.
Common Questions
Can I remove mortgage insurance later?
On a conventional loan, yes. It ends automatically when the balance reaches 78% of the original value, and you can ask to remove it at 80%. On an FHA loan with less than 10% down, it stays for the life of the loan, so most borrowers remove it by refinancing.
What credit score do I need?
Conventional loans generally require 620 or higher. FHA loans allow scores down to 580 with 3.5% down.
Are FHA rates lower than conventional rates?
Often, yes, especially for borrowers with lower credit scores. The lower rate is offset by FHA’s mortgage insurance, which is why it helps to compare the full payment.