Conventional vs FHA vs VA loans: how to pick the right mortgage
· 8 min read
The three big programs
Most US first-time buyers will choose between three loan types:
- Conventional: backed by Fannie Mae or Freddie Mac. Standard product. Requires reasonable credit (~620+). PMI required below 20% down but auto-cancels at 78% LTV.
- FHA: backed by the Federal Housing Administration. Allows 3.5% down with credit scores as low as 580. Mortgage insurance premium (MIP) often runs the entire loan term — a non-trivial long-run cost.
- VA: backed by the Department of Veterans Affairs. Available to qualifying military service members. Allows 0% down with no monthly mortgage insurance. There is a one-time funding fee.
Cost comparison
For a $300,000 home, here is roughly what each requires up-front:
| Loan | Down payment | Mortgage insurance | Funding/up-front fees |
|---|---|---|---|
| Conventional 5%-down | $15,000 | ~$120/mo PMI until 80% LTV | None |
| FHA | $10,500 | ~$200/mo MIP for life of loan | 1.75% UFMIP (~$5,250 financed) |
| VA | $0 | None | ~2.15% funding fee (financed) |
Decision framework
- Eligible for VA? Take the VA loan in nearly all cases.
- Credit score 620+ and 5%+ down? Conventional is usually cheapest long-term.
- Credit 580–619 or only 3.5% down? FHA is your path in.
- Above 700 credit and 5%+ down? Conventional always wins.
Always have your lender quote both conventional and FHA so you can see the full math.
Frequently asked questions
What is the key takeaway about conventional vs FHA vs VA loan?
Conventional loans require 3%–20% down and PMI is removable at 80% LTV. FHA loans accept down payments as low as 3.5% with lower credit-score requirements but mortgage insurance often lasts the life of the loan. VA loans, available to qualifying veterans and active-duty service members, allow 0% down with no monthly mortgage insurance — almost always the best deal when you qualify.
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