FHA vs. Conventional: Which Loan Is Right for You?
This is one of the most common questions buyers have when they start the mortgage process. And the honest answer is: it depends on your situation. There's no universally better option. The right loan is the one that fits your credit, your down payment, and your long-term goals.
Here's a straightforward breakdown of how each loan works and how to think about which one makes sense for you.
What Is an FHA Loan?
FHA loans are backed by the Federal Housing Administration. Because the government is insuring the loan against default, lenders are able to offer more flexible qualifying guidelines than they would on a conventional loan.
That makes FHA a popular option for buyers who are earlier in their credit journey or working with a smaller down payment.
Key features of FHA loans:
- Minimum credit score of 580 with 3.5% down (or as low as 500 with 10% down)
- Down payment as low as 3.5%
- More flexible debt-to-income ratio guidelines
- Available for primary residences only
- Requires mortgage insurance for the life of the loan in most cases
That last point is worth paying attention to. FHA loans carry both an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, rolled into the loan, and an annual mortgage insurance premium (MIP) that gets added to your monthly payment. On most FHA loans today, that MIP doesn't go away unless you refinance.
What Is a Conventional Loan?
Conventional loans are not government-backed. They're originated by lenders and typically sold to Fannie Mae or Freddie Mac on the secondary market. Because there's no government guarantee, the qualifying standards are generally stricter, but the long-term cost structure can be more favorable.
Key features of conventional loans:
- Minimum credit score typically 620 or higher (better rates with 700+)
- Down payment as low as 3% (though 5–20% is more common)
- Private mortgage insurance (PMI) required if putting less than 20% down
- PMI can be removed once you reach 20% equity
- Can be used for primary residences, second homes, and investment properties
The big advantage of conventional over FHA, for the right borrower, is that PMI is not permanent. Once your loan balance drops to 80% of the home's value, you can request removal. On an FHA loan, you're typically paying MIP for the life of the loan regardless of your equity position.
FHA vs. Conventional Side by Side
| FHA | Conventional | |
|---|---|---|
| Minimum credit score | 580 (3.5% down) | 620 |
| Minimum down payment | 3.5% | 3% |
| Mortgage insurance | Required, usually permanent | Required under 20% down, removable |
| DTI flexibility | More flexible | Stricter |
| Property types | Primary residence only | Primary, second home, investment |
| Loan limits (2025) | Set by county | Set by county (higher in some areas) |
So Which One Is Better?
It comes down to three things: your credit score, your down payment, and how long you plan to stay in the home.
FHA tends to make more sense if:
- Your credit score is below 680
- You have a higher debt-to-income ratio
- You have minimal savings for a down payment
- You've had past credit issues that are now resolved
Conventional tends to make more sense if:
- Your credit score is 700 or higher
- You can put at least 5% down
- You want the ability to remove mortgage insurance
- You're buying a second home or investment property
Where it gets interesting is in the middle of the credit score range, roughly 620 to 680, where both loans are technically available. In that range the comparison gets more nuanced. Sometimes FHA has a lower payment despite the permanent MIP. Sometimes conventional wins even with PMI because the rate is better. The only way to know for sure is to run both scenarios side by side with your actual numbers.
That's exactly what a mortgage broker does. We don't just slot you into one program. We look at your full picture and show you what each option actually costs you monthly and over time.
A Note on Loan Limits
Both FHA and conventional loans have loan limits that vary by county. In Clark County (Las Vegas/Henderson), the 2025 FHA loan limit for a single-family home is $524,225. Conventional conforming loan limits are higher. If you're buying above those limits, you're looking at a jumbo loan, which is a different conversation.
One More Thing: Seller Perception
In a competitive market like Las Vegas, it's worth knowing that some sellers and listing agents have historically preferred conventional offers over FHA offers. The perception is that FHA loans are more likely to have appraisal or inspection issues that can delay or kill a deal.
It's not always fair, and it's not always accurate. But it's real, and it's worth factoring in if you're in a multiple-offer situation. Your mortgage broker and your real estate agent should be talking through this together on your behalf.
Bottom Line
FHA and conventional loans both have a place, and neither is automatically the right answer. The best loan for you is the one that gets you into a home comfortably and makes financial sense given your specific credit, savings, and goals.
See Both Loans Side by Side
We'll run FHA and conventional scenarios with your real credit, down payment, and goals — so you can see the actual monthly cost and long-term difference. No pressure, no obligation.