FHA loans are backed by the government and are easier to qualify for — lower credit score requirements, lower down payment, more flexible on debt. Conventional loans are not government-backed, typically require stronger credit, but don't carry the lifetime mortgage insurance that FHA loans do. Which one is better depends entirely on your situation.
Here's how to think through it.
What is an FHA loan?
FHA stands for Federal Housing Administration. The FHA doesn't actually lend you money — it insures the loan, which means if you default, the government covers the lender's loss. Because of that guarantee, lenders are willing to approve people with lower credit scores and smaller down payments than they'd normally accept.
- Down payment minimum: 3.5% (with a 580+ credit score)
- Credit score minimum: 580 (or 500 with 10% down)
- Mortgage insurance: Required for the life of the loan in most cases
That last point is important. FHA loans come with two types of mortgage insurance: an upfront premium (1.75% of the loan amount, rolled into your loan) and an annual premium paid monthly. If you put less than 10% down, that monthly cost stays with you for the entire loan term.
What is a conventional loan?
Conventional loans follow guidelines set by Fannie Mae and Freddie Mac. They're not government-backed, so lenders take on more risk — which is why the qualifying standards are a bit tighter.
- Down payment minimum: 3% (for first-time buyers in some programs), typically 5–20%
- Credit score minimum: 620, though better rates kick in above 700
- Mortgage insurance (PMI): Required if you put down less than 20%, but it cancels automatically once you hit 20% equity
That cancellation point is a big deal. With a conventional loan, once your home value and your payoff balance get you to 20% equity, PMI goes away. With FHA (if you put less than 10% down), that monthly insurance payment doesn't go away without refinancing.
So which one should you pick?
Here's the honest version:
FHA tends to make more sense if:
- Your credit score is under 680
- You have a higher debt-to-income ratio
- You don't have a large down payment saved
Conventional tends to make more sense if:
- Your credit score is 700 or higher
- You can put at least 10–20% down
- You want the option to cancel mortgage insurance later
One scenario where conventional wins even with lower credit: if home prices in your area are above the FHA loan limit. In Riverside County, the 2026 FHA loan limit for a single-family home is $766,550. Above that, you're looking at conventional or jumbo financing regardless.
What about VA loans?
If you're a veteran or active duty service member, VA loans are almost always the better option — zero down, no PMI, and competitive rates. They're one of the best benefits available to those who served, and a lot of veterans don't use them because they don't realize they qualify.
I'll always check your VA eligibility before we look at any other option.
Want to compare both side by side for your situation?
The difference in monthly payment between an FHA and conventional loan on the same house can be surprising — in either direction — depending on your credit score and down payment. I can run both scenarios for you in about 10 minutes so you can see exactly what each option looks like with your actual numbers.