Conventional and FHA loans are the two most common choices for buyers who are not using VA or USDA financing. Neither is better in every case. The right fit depends on your credit, your savings, how long you plan to stay and the home you want to buy.
The short version
The CFPB describes conventional loans as the majority of loans and says they typically cost less than FHA loans but can be harder to qualify for. It describes FHA loans as offering a low down payment and being available to borrowers with lower credit scores (Consumer Financial Protection Bureau).
Questions to ask yourself
- How strong is my credit today? A conventional loan may reward strong credit with lower long-term cost, while FHA can open the door when credit is still being rebuilt.
- How much cash do I have for the down payment and closing costs? Both programs offer low down payment paths. The mortgage insurance that comes with a smaller down payment is where the monthly cost differs.
- How long will I own the home? If you expect to stay for years, the way mortgage insurance ends (or does not) matters more.
- Does the home qualify? FHA appraisals include safety and condition standards that some homes in need of repair may not meet as-is.
Compare real numbers, not rules of thumb
The only way to know which loan costs less for you is to compare actual estimates side by side, including the interest rate, mortgage insurance and closing costs. The CFPB's Loan Estimate explainer shows how to read them. A loan officer can run both options for your situation in one conversation.
This article is general information for educational purposes. It is not financial, tax or legal advice, not an offer to lend or extend credit, and not a commitment to lend. Programs, limits and eligibility change and vary by state, property and borrower. Xpert Home Lending, Inc., NMLS #2179191. Equal Housing Lender.