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

FHA Loan: Pros and Cons

FHA loans are government-backed and accept lower credit scores (580+) and lower down payments (3.5%). The catch: you pay mortgage insurance premium (MIP) for the life of the loan — typically 0.55–1.05% annually. This adds up to tens of thousands over the life of a 30-year loan.

Conventional Loan: Pros and Cons

Conventional loans require 620+ credit and typically 5–20% down. Private mortgage insurance (PMI) applies if you put down less than 20%, but unlike FHA's MIP, PMI automatically drops off when you reach 20% equity. For borrowers who qualify, conventional is almost always cheaper long-term.

Which Should You Choose?

If your credit score is below 660 or you can only put down 3.5%, FHA is likely your only option. If your score is 680+ and you can put down 5–10%, run the numbers — conventional will almost certainly be cheaper over 30 years despite the similar upfront costs.