FHA vs Conventional Loan: Which Is Better in 2025?

The Two Most Popular Loan Types

FHA and Conventional loans account for over 80% of all mortgages. Choosing the right one can save you tens of thousands over 30 years.

FHA Loans

Minimum down payment: 3.5% (with 580+ credit score)
Mortgage insurance: 1.75% upfront MIP + 0.55% annual MIP (for the life of the loan)
Credit score: 580 minimum (500 with 10% down)
Best for: First-time buyers with lower credit scores

Conventional Loans

Minimum down payment: 3-5% (varies by lender)
PMI: Required under 20% down, but cancellable once you reach 20% equity
Credit score: 620+ typical minimum
Best for: Buyers with good credit who want PMI to eventually go away

The Big Difference

FHA MIP never goes away (unless you refinance). Conventional PMI drops off at 20% equity. For a $350K home, this difference can mean $30K+ over the life of the loan. Use our calculator to see exact numbers for your state.