FHA vs Conventional Loan 2026
Side-by-side comparison: down payment, credit, mortgage insurance, loan limits, and the rule for picking. Current 30-year rate: 6.23% (FRED, 2026-04-23).
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Min credit score | 580 (3.5% down) / 500 (10% down) | 620+ typical, 740+ for best rates |
| Min down payment | 3.5% | 3% (HomeReady/Home Possible) / 5% standard |
| Mortgage insurance | 1.75% upfront MIP + 0.55% annual | PMI 0.3-1.5% annual |
| PMI cancellation | Lasts loan life (or 11 years if 10%+ down) | Auto-cancels at 78% LTV |
| 2026 loan limit (baseline) | $524,225 | $806,500 |
| High-cost area limit | $1,209,750 | $1,209,750 |
| Max DTI typical | ~57% with comp factors | ~50% |
| Property condition | Strict FHA appraisal (safety items required) | Standard appraisal |
| Best for | First-time buyers, lower credit, smaller down payment | 700+ credit, 10%+ down, removable PMI plan |
FAQ
Which is better, FHA or conventional loan in 2026?
Neither is universally better. FHA wins for: lower down payment (3.5% vs 3-5%), lower credit score requirements (580 vs 620+), and easier qualification with debt. Conventional wins for: PMI removable at 20% equity (FHA MIP often lasts the loan life), higher loan limits ($806k+ baseline vs $524k baseline FHA), and no upfront MIP fee. The crossover: with 10%+ down and 700+ credit, conventional almost always wins long-term.
What is the minimum down payment for FHA vs conventional?
FHA: 3.5% with credit score 580+ (10% if 500-579). Conventional: 3% via Fannie Mae HomeReady (income limits) or Freddie Mac Home Possible. Standard conventional: 5% min for primary residence. To avoid PMI on conventional, you need 20% down.
How much is FHA mortgage insurance vs conventional PMI?
FHA charges (1) Upfront MIP of 1.75% of loan amount (financed into loan), and (2) Annual MIP of 0.55% (most loans <$726k with <5% down). Conventional PMI ranges 0.3%-1.5% based on credit score and LTV — usually around 0.5% for 700+ credit at 10% down. Critical difference: conventional PMI cancels at 20% equity automatically; FHA MIP often lasts the entire loan unless you put 10%+ down (then 11 years).
What are the 2026 FHA loan limits?
For 2026, FHA loan limits are: $524,225 in low-cost areas (single-family); $1,209,750 in high-cost areas like coastal California, NYC, DC. The 2026 conventional conforming loan limit is $806,500 baseline ($1,209,750 in high-cost). Above these, you need a jumbo loan with stricter requirements.
Can I refinance from FHA to conventional?
Yes, and many borrowers do once they reach 20% equity to drop FHA MIP forever. Requirements: (1) 620+ credit score, (2) 20% equity (verified by appraisal), (3) reasonable DTI (<43% typically). The savings can be significant — eliminating MIP saves $200-500/month on a $400k loan.
Why do sellers sometimes prefer conventional offers?
In competitive markets, sellers favor conventional because: (1) FHA appraisals are stricter — they can require seller-paid repairs for safety items conventional would overlook; (2) conventional buyers typically have stronger financial profiles; (3) FHA closing can take longer. In a buyer's market this matters less, but in 2026 competitive metros, conventional offers carry a 5-10% acceptance edge.