Loan types

FHA vs. conventional loans: which is right for you?

Educational guide · Updated 2026

Two of the most common loan types for buyers are FHA and conventional. They serve different situations, and the right choice usually comes down to your credit, your down payment, and how long you plan to keep the loan. Here's how they actually differ.

What is a conventional loan?

A conventional loan isn't backed by a government agency — it follows guidelines set by Fannie Mae and Freddie Mac, which is why it's sometimes called a "conforming" loan when it falls under their limits. Conventional loans tend to reward stronger credit and larger down payments with better terms.

What is an FHA loan?

An FHA loan is insured by the Federal Housing Administration. That government backing lets lenders approve buyers with lower credit scores and smaller down payments than conventional loans typically allow — which is why FHA is popular with first-time buyers.

The key differences

Mortgage insurance is the biggest long-term difference

On a conventional loan, private mortgage insurance (PMI) is required if you put down less than 20%, but it can be cancelled once you reach about 20% equity. On an FHA loan, the mortgage insurance premium (MIP) often lasts the entire life of the loan if your down payment was below 10% — the main way to remove it is to refinance into a conventional loan later.

That difference can add up over the years, which is why a buyer who qualifies for both sometimes chooses conventional even with a slightly higher upfront cost.

So which should you choose?

There's no universal answer, but as a rough guide: if your credit is strong and you can put down a meaningful amount, conventional often costs less over time. If your credit is still improving or your down payment is small, FHA may be what gets you approved in the first place. The only way to know for your situation is to compare actual offers from a lender.

This article is educational and general in nature. Loan eligibility, rates, and requirements vary by lender, loan program, and your individual situation. Confirm specifics with a licensed lender.