The useful FHA-versus-conventional comparison starts with two offers you could actually qualify for. A lower note rate can come with different insurance costs, financed fees or cash requirements. Compare the payment now and the cost over the time you expect to keep the loan.
Start with eligibility rather than a score shortcut
FHA insures eligible loans made by approved lenders. Conventional loans are not insured or guaranteed under FHA, VA or USDA programs. Conforming conventional loans must meet applicable Fannie Mae or Freddie Mac requirements as well as the lender’s requirements.
HUD’s credit guidance reviewed November 13, 2026 applies to FHA case numbers assigned before January 1, 2027: a minimum decision credit score of 580 or higher permits maximum financing; 500–579 limits loan-to-value to 90%; below 500 is ineligible under that stated score rule. Standard maximum purchase financing can correspond to a 3.5% minimum investment. Lenders may impose stricter requirements. Recheck the policy for a later case assignment. HUD publishes the effective-date qualification.
Conventional eligibility cannot be reduced to one universal minimum score. Fannie Mae’s November 4, 2026 guide distinguishes Desktop Underwriter casefiles from manual underwriting. Its automated assessment without a stated minimum score is not automatic approval. Income, debts, assets, property and lender requirements still matter.
Ask how insurance changes the comparison
| Decision | FHA | Conventional |
|---|---|---|
| Mortgage insurance | Applicable upfront and annual MIP add to costs. Financing upfront MIP increases the balance. | PMI often applies with a smaller down payment. Cost and payment structure depend on the loan. |
| Ending insurance | Applicable case-date, original LTV and term rules control duration. | Cancellation and automatic termination have specific conditions; appreciation alone does not remove PMI. |
| Property use | Generally intended for an eligible principal residence. | Programs can cover principal residences, second homes or investment property with different terms. |
| Loan size | Check HUD’s county and unit limits. | Check the conforming county limit or evaluate a separate jumbo program. |
For the forward loans covered by HUD’s current MIP schedule, an original LTV at or below 90% generally carries annual MIP for 11 years; above 90% it generally lasts for the mortgage term. Older loans and special transactions can follow different rules. Later appreciation does not trigger conventional-style cancellation. Do not estimate lifetime MIP by multiplying the first month’s charge by every month of the term. HUD’s schedule identifies the applicable categories.
Review the borrower and the home together
Prepare verifiable income and asset records, explain gifts and identify obligations accurately. Self-employment or non-wage income needs the documentation appropriate to that source. There is no universal rule that everyone must have the same employer for two years.
An eligible loan amount does not approve the property. Appraisal findings, condition, condominium eligibility and the number of units can change the review. An owner-occupied multiunit purchase also needs specific occupancy and rental-income analysis. Ask about these details before making an offer.
Compare down payment, total cash to close, mortgage insurance, rate, APR and the savings left afterward. Ask how the comparison changes if you keep the loan longer than expected. Refinancing later requires new eligibility and costs; it is not a promised escape from today’s terms.
Use the FHA and conventional program pages to start a discussion with Douglas. ECHL can compare available lender options and explain which assumptions drive the result.
Sources & further reading
- answers.hud.gov — Does FHA require a minimum credit score and how is it determined
- Fannie Mae Selling Guide — general requirements credit scores
- HUD — 2023 05hsgml
- entp.hud.gov — hicostlook.cfm
- yourhome.fanniemae.com — youve got options when it comes home financing
This article is maintained by Equity Capital Home Loans. Program rules can change. Confirm the requirements for your property and loan before making a decision.