Is FHA Better Than Conventional?

Worked Example: $300,000 Purchase Price

Hypothetical illustration only — not a rate quote or offer to lend. Actual pricing depends on credit, market conditions, and program guidelines at the time of application.

Detail	FHA (3.5% down)	Conventional (5% down)
Down payment	$10,500	$15,000
Base loan amount	$289,500	$285,000
Upfront MIP financed (1.75%)	$5,066.25	N/A
Total starting loan amount	$294,566.25	$285,000
Monthly MI	Annual MIP, duration per FHA rules*	PMI, cancellable per rules below
Credit score fit	580+ typical minimum	620+ typical minimum

On PMI cancellation (conventional): Requesting cancellation at 80% of the original property value generally requires a borrower request and satisfaction of applicable conditions (including payment history and property value requirements). Automatic termination generally occurs when the principal balance is first scheduled to reach 78% of the original value, provided the borrower is current on payments. See CFPB guidance for details.

On FHA MIP duration: For this 3.5%-down example, annual MIP applies for the life of the loan under current FHA rules. Loans with 10% or more down may have MIP for 11 years instead. FHA MIP generally cannot be removed without refinancing into a non-FHA loan.

Assumptions: 30-year fixed, single-unit primary residence. Base loan = purchase price minus down payment. Total starting loan = base loan plus financed upfront MIP (FHA only). MI/MIP rates vary by credit tier and LTV.

Sources: HUD — FHA mortgage insurance · CFPB — Private mortgage insurance · Fannie Mae Selling Guide

When FHA Usually Wins

• Lower credit scores where conventional pricing jumps
• Smaller down payments with more flexible underwriting
• Gift-fund structures that fit FHA cleanly
• Certain credit-event timelines FHA handles more flexibly
• Short-term ownership where lifetime MIP is less of a concern