FHA vs. Conventional Loan: Which Is Better for You in 2026?

One of the most common questions first-time buyers ask is whether to go FHA or conventional. There is no universally better option — but there is almost always a better option for your specific situation.

Down Payment Requirements

FHA requires 3.5% down for borrowers with 580+ credit scores. Conventional starts at 3% down through HomeReady or Home Possible programs for income-eligible buyers. Standard conventional requires 5% down for primary residences.

Mortgage Insurance: The Critical Difference

FHA requires an upfront MIP of 1.75% of the loan amount plus an annual MIP of roughly 0.55 to 1.05%. In most cases FHA MIP is permanent for the life of the loan.

Conventional PMI can be removed once you reach 20% equity. Put down 20% upfront and there is no PMI at all. Over time this makes conventional significantly cheaper for buyers who qualify.

Credit Score Requirements

FHA allows scores as low as 580 for 3.5% down though lender overlays often require 620 in practice. Conventional requires 620 minimum with competitive rates available at 700+.

DTI Limits

FHA allows DTI up to 57% in some cases with compensating factors. Conventional typically caps at 45 to 50%.

Property Condition

FHA has strict property condition requirements that can require repairs before closing. Conventional appraisals have fewer mandatory repair requirements.

When FHA Wins: credit below 680, DTI above 45%, limited down payment savings.

When Conventional Wins: credit above 700, 10%+ down payment, desire to eliminate mortgage insurance.

At East Coast Mortgage, we run both scenarios for every borrower. Submit your scenario and we will show you exactly which program saves you the most money.