FHA vs. Conventional Loan: Which Is Right for You? (2026)
FHA and conventional are the two most common ways to buy a home with less than 20% down. Neither is universally 'better' — the right choice depends on your credit, your down payment, and how long you'll keep the loan. Here's how to think about it.
By Jodie Barber, NMLS #76185 · 5 min read · Updated July 2026
- ✦FHA = lower credit bar (580 for 3.5% down); conventional = better pricing for strong credit.
- ✦Conventional PMI drops at 20% equity; FHA MIP usually stays for the life of the loan.
- ✦2026 conforming baseline is $832,750; FHA floor is $541,287.
- ✦The best choice comes from comparing both on your real numbers.
Down payment and credit
FHA loans are built for flexibility. You can put down as little as 3.5% with a credit score of 580 (and sometimes qualify with a lower score and 10% down). Conventional loans can go as low as 3% down for eligible buyers, but they generally reward stronger credit with better pricing.
If your credit is still on the way up, FHA is often the more forgiving path. If your credit is strong, conventional usually costs less over time.
Mortgage insurance — the biggest difference
This is where the two really diverge. Conventional loans carry private mortgage insurance (PMI) only until you reach 20% equity — then it drops off automatically, and your payment falls.
FHA loans carry a mortgage insurance premium (MIP) that, on most modern FHA loans with a low down payment, stays for the life of the loan. The way to remove it is usually to refinance out of FHA once you have enough equity and credit to qualify for a conventional loan.
2026 loan limits
Both programs cap how much you can borrow, and the limits rose in 2026. The conventional conforming baseline is $832,750 for a one-unit home (higher in designated high-cost counties, up to $1,249,125). The FHA floor is $541,287, with higher limits in more expensive counties.
In pricier markets — parts of the Seattle metro or Northern Virginia, for example — the conventional limit is meaningfully higher than FHA's, which can make conventional (or a jumbo loan) the only option above a certain price.
So which should you choose?
As a rule of thumb: lean FHA if your credit needs room to grow or your down payment is tight; lean conventional if your credit is strong and you want to shed mortgage insurance at 20% equity. But the real answer comes from running both side by side for your actual numbers — which is exactly what Jodie does before you decide.
Frequently asked questions
- Is an FHA or conventional loan better for a first-time buyer?
- It depends on your credit and down payment. FHA is more forgiving on credit; conventional lets you drop mortgage insurance at 20% equity. Comparing both for your situation is the only way to know.
- Can I switch from FHA to conventional later?
- Yes — many buyers use FHA to get in, then refinance into a conventional loan once they have enough equity and credit to remove mortgage insurance.
- What are the 2026 loan limits?
- The conventional conforming baseline is $832,750 (up to $1,249,125 in high-cost areas). The FHA floor is $541,287, with higher limits in more expensive counties.
Keep reading
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