For most buyers, the real first decision isn’t a lender — it’s a loan type. Conventional and FHA loans cover the large majority of purchases, and the right choice usually comes down to your credit and how the mortgage insurance shakes out.
The quick version
- FHA — built for accessibility: 3.5% down with a 580+ credit score, more forgiving guidelines, but mortgage insurance that generally stays for the life of the loan
- Conventional — built for cost: as little as 3% down, best pricing for stronger credit (think 720+), and private mortgage insurance (PMI) that cancels once you reach 20% equity
Down payment
FHA requires 3.5% down with qualifying credit. Conventional can start as low as 3% for eligible buyers, so the entry cost is similar. If your credit is on the lower side, FHA may be the only one of the two available to you.
Credit
This is the deciding factor for many buyers. FHA’s flexible guidelines make it friendlier to credit scores in the 500s–600s and to recent credit bumps. Conventional rewards stronger credit with better pricing — the higher your score, the more attractive it becomes relative to FHA.
Mortgage insurance — where the long-term cost hides
Both loans charge mortgage insurance when you put down less than 20%, but they behave very differently over time. Conventional PMI cancels once you build 20% equity. FHA mortgage insurance typically lasts the life of the loan when you put down less than 10% — meaning you’d refinance to get rid of it. Over several years, that difference can outweigh a small gap in interest rate.
So which should you choose?
- Lean FHA if your credit is still building or your score is below the mid-600s
- Lean conventional if you have solid credit and want PMI you can eventually drop
- Run both if you’re near the line — the cheaper option isn’t always obvious until you see the numbers side by side
The bottom line
There’s no universally “better” loan — only the better fit for your credit, down payment, and how long you’ll keep the mortgage. Because we shop your file across a full lender network, we can price both paths and show you the real monthly and lifetime cost before you decide. That’s the whole point of working with a broker instead of a single lender.
This article is for general education and isn't financial advice or a commitment to lend. Loan programs, terms, and availability depend on your qualifications and are subject to credit approval. Ignite Loan Partners, NMLS #2381991. Equal Housing Opportunity.