Conventional Loan vs FHA Down Payment (2026 Guide)

Compare down payment requirements, credit score requirements, and costs between conventional and FHA loans to find the best option for your situation.

Down Payment Comparison

Home Price

Credit Score

FHA Down Payment (3.5%)

$12,250

Conventional Down Payment (3%)

$10,500

FHA LTV Ratio96.5%

Conventional LTV Ratio97%

FHA Upfront MIP$5,910.63

Key Differences: Conventional vs FHA

Conventional Loan

• 3-20% down payment
• 620+ credit score
• PMI removable at 78% LTV
• Better rates for good credit
• Strict qualification requirements

FHA Loan

• 3.5% minimum down payment
• 580+ credit score
• MIP for life of loan (usually)
• More flexible guidelines
• Upfront + annual MIP

Which Loan is Right for You?

Choose Conventional If:

• You have good credit (700+)
• You can make a 20% down payment
• You want to avoid permanent PMI
• You qualify for better interest rates

Choose FHA If:

• You have lower credit (580-620)
• You need a low down payment
• You're a first-time home buyer
• You have higher debt-to-income ratio

Conventional vs FHA: Cost Comparison (2026)

As of 2026, here's a side-by-side comparison for a $350,000 home with 5% down and a 720 credit score:

Cost Factor	Conventional (5% Down)	FHA (3.5% Down)
Down Payment	$17,500	$12,250
Loan Amount	$332,500	$337,750
Est. Rate (2026)	7.0%	6.75%
Monthly P&I	$2,212	$2,188
Monthly Mortgage Insurance	$208.00 (PMI)	$282.00 (MIP)
Total Monthly Payment	$2,420	$2,470
Insurance Duration	Until 20% equity	Life of loan (typically)

Key Insight: As of 2026, FHA loans often have lower upfront costs but higher lifetime costs due to permanent MIP. Conventional loans with 5% down may save money long-term if you build equity quickly and remove PMI.

Frequently Asked Questions

What is the difference between conventional and FHA down payment?

Conventional loans typically require 3-20% down depending on the program, while FHA loans require a minimum of 3.5% down (580+ credit) or 10% down (500-579 credit). FHA loans have more flexible credit requirements.

Which is better: conventional or FHA?

Conventional loans are better for borrowers with good credit (620+) and a stable financial profile, offering lower monthly costs once PMI is removed. FHA loans are better for first-time buyers or those with lower credit scores (580+).

Can I get a conventional loan with 3% down?

Yes, Fannie Mae's HomeReady and Freddie Mac's Home Possible programs allow down payments as low as 3% for qualified buyers with credit scores of 620+. These programs also allow non-occupant co-borrowers.

Is PMI required for FHA loans?

Yes, FHA loans require both an upfront Mortgage Insurance Premium (MIP) of 1.75% and an annual MIP of 0.45-1.05%. MIP typically lasts the entire loan term unless you put down 10% or more, in which case it can be removed after 11 years.

What credit score is needed for conventional vs FHA?

Conventional loans typically require a credit score of 620+, while FHA loans can approve borrowers with scores as low as 580 (with 3.5% down) or 500-579 (with 10% down). However, many lenders have higher internal minimums.

What is the maximum loan amount for FHA vs conventional?

FHA loan limits vary by county but are generally lower than conventional conforming limits. For 2024, FHA limits range from $472,030 to $1,416,875, while conventional conforming limits are $766,550 to $1,149,825.

Can I use gift funds for down payment?

Both FHA and conventional loans allow gift funds for down payments, but conventional loans may require you to contribute some of your own funds depending on the program. FHA loans are more flexible with gift funds.

How long does FHA MIP last?

For FHA loans with less than 10% down, MIP lasts the entire loan term. With 10% or more down, MIP can be removed after 11 years. Conventional PMI is automatically canceled at 78% LTV.

What are the income limits for conventional vs FHA?

FHA loans have no income limits, making them accessible to all income levels. Some conventional programs like HomeReady have income limits based on area median income (AMI), typically 80-100% of AMI.

Can I refinance from FHA to conventional?

Yes, refinancing from FHA to conventional is common. This is often done to remove MIP once the borrower has enough equity. The FHA Streamline Refinance is also an option for staying in an FHA loan.

What property types are allowed with FHA vs conventional?

FHA loans are primarily for owner-occupied primary residences. Conventional loans allow investment properties and second homes, but require higher down payments (typically 15-25%) and have stricter underwriting.

Which loan has lower closing costs?

FHA loans typically have lower upfront closing costs because they have standardized fees. However, the upfront MIP of 1.75% adds to the total cost. Conventional loans may have higher closing costs but no upfront mortgage insurance.

Can I get an FHA loan for a fixer-upper?

Yes, FHA 203(k) loans allow you to finance both the purchase and renovation costs in one loan. Conventional loans also have renovation options like Fannie Mae HomeStyle loans.

Always consult with a qualified mortgage professional to understand your loan options.