FHA vs Conventional vs VA loans
Plain-language comparison of the four major loan programs, who qualifies for each, and which one usually wins.
Last updated April 2026
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There are four major government-backed or government-touched loan programs in the US: Conventional, FHA, VA, and USDA. Each has different down-payment requirements, mortgage insurance rules, credit-score floors, and cost structures. The right one depends on your specific situation. Here’s how to think about it.
Conventional
The default. Backed by Fannie Mae or Freddie Mac (collectively, the “GSEs”). Most buyers with decent credit and 5%+ down end up here.
Who qualifies
- Minimum FICO 620 (some lenders 640)
- Minimum 3% down (Conventional 97 / HomeReady / Home Possible programs for first-time buyers)
- Standard 5% down for most repeat buyers
- DTI cap ~50% with strong compensating factors; typical ~43%
- Loan amount up to the conforming limit (~$806,500 baseline 2026, higher in high-cost counties)
Costs
- Best rates available (in absolute terms) for borrowers with 760+ FICO and ≥20% down
- PMI required for <20% down. Cancels at 78% LTV automatically (HPA), or can be requested earlier at 80%, or via reappraisal once the home appreciates. PMI cost varies widely: 0.20–1.5%+ of loan annually.
- LLPA (Loan-Level Price Adjustments) hit credit-score / LTV bands. Bad LLPAs (low FICO + high LTV) can add 1–3% to your loan as upfront fee. The Credit Score LLPA calculator shows yours.
Best for
- Strong credit (700+ FICO), 10%+ down
- High loan amounts (jumbos are also a flavor of conventional)
- Anyone who wants the option to drop mortgage insurance eventually
FHA
Federal Housing Administration insures the loan. Designed for borrowers who can’t qualify conventional: lower credit, lower down payment, or higher DTI.
Who qualifies
- 580+ FICO with 3.5% down; 500–579 FICO with 10% down
- DTI up to 43% standard, 50%+ with strong file
- Loan amount up to FHA county loan limits (lower than conforming in many areas)
- Primary residence only
Costs
- Upfront MIP: 1.75% of loan, paid at closing or financed in
- Annual MIP: ~0.55% of balance, paid monthly
- For loans <10% down originated after June 2013: MIP is for the LIFE of the loan. The only escape is refinancing to conventional once you have 20% equity.
- For loans ≥10% down originated after June 2013: MIP cancels after 11 years (regardless of LTV).
Best for
- Lower credit (580–680)
- Less than 5% down
- Higher DTI than conventional accepts
- First-time buyers using DPA programs (FHA tends to combine well with state DPA)
Worst for
- Anyone who could qualify conventional with similar down. Conventional PMI cancels; FHA MIP doesn’t. Over a 30-year term, life-of-loan MIP can cost $50k+ vs cancellable PMI.
VA
For eligible veterans, active-duty service members, and surviving spouses. The best terms in the US mortgage market.
Who qualifies
- Eligibility certificate from the VA (verifies service)
- No FICO minimum from VA itself; lenders typically require 580–620
- DTI up to 50%+ allowed; VA uses “residual income” test instead of strict caps
- Primary residence only
Costs
- 0% down standard
- No mortgage insurance ever
- VA funding fee (one-time, can be financed in):
- First use, ≥10% down: 1.25%
- First use, ≥5% down: 1.50%
- First use, <5% down: 2.15%
- Subsequent use, ≥10% down: 1.25%
- Subsequent use, ≥5% down: 1.50%
- Subsequent use, <5% down: 3.30%
- IRRRL streamline refi: 0.50%
- Cash-out refi: 2.15% (first use) / 3.30% (subsequent)
- Exempt: any service-connected VA disability rating, Purple Heart recipients, surviving spouse of a service-connected death
- Often the lowest rates available
Best for
- Anyone eligible. If you qualify, VA almost always wins.
USDA
For rural and suburban properties in eligible areas, with income limits. Government-backed via the Rural Development program.
Who qualifies
- Property in a USDA-eligible area (check the eligibility map; many small towns and exurbs qualify)
- Household income at or below 115% of area median
- Primary residence only
- Typical FICO 640+
Costs
- 0% down standard
- 1% upfront guarantee fee (can be financed in)
- 0.35% annual fee for the life of the loan
Best for
- Rural / exurban borrowers within the income limits
- Anyone who’d otherwise need a 0%-down option but isn’t a veteran
Side-by-side comparison
| Feature | Conventional | FHA | VA | USDA |
|---|---|---|---|---|
| Min down | 3% | 3.5% | 0% | 0% |
| Min FICO | 620 | 580 (3.5% down) | None (lender ~580) | 640 |
| Mortgage insurance | PMI, cancellable | MIP, often life-of-loan | None | Annual fee, life of loan |
| Upfront fee | None | 1.75% UFMIP | 1.25–3.3% funding fee | 1.0% |
| Loan limit | ~$806,500 (conforming) | County FHA limits | None (eff. county-driven) | Income-based |
| Property restrictions | None | Owner-occupied | Primary residence | Rural area + income |
How to pick
- Are you VA-eligible? Use VA. Almost always wins on cost.
- Are you in a USDA area within income limits? Compare USDA vs FHA. USDA usually wins because of 0% down and lower annual fee.
- Otherwise, the FHA vs Conventional decision depends on your
credit and down payment:
- FICO 760+, ≥20% down → conventional with no PMI
- FICO 700+, 5–20% down → conventional with cancellable PMI
- FICO 620–700, <10% down → run both quotes, compare lifetime cost including the life-of-loan MIP penalty for FHA
- FICO 580–620 → FHA is your only option
- Buying a multi-unit (2-4)? FHA self-sufficiency test for 3-4 units is strict. Conventional 5% down for owner-occupied 2-units is often the cleanest path.
The Property Type Impact calculator shows program eligibility for each property type. The Mortgage calculator lets you model different rate/down/term combinations.
A few non-obvious wrinkles
- You can refinance from FHA to Conventional once you have 20% equity. Many FHA buyers do this within 3-5 years to escape the life-of-loan MIP. The PMI Removal calculator handles this case.
- VA “entitlement” can be re-used. You can have multiple VA loans simultaneously in some cases.
- Conventional 97 is not the same as HomeReady or Home Possible. HomeReady (Fannie) and Home Possible (Freddie) are 3%-down programs with reduced PMI for income-qualified borrowers. Always ask if you qualify.
- FHA condo approval is its own thing. FHA only finances condos in FHA-approved projects. Verify at the FHA Connection database.
- VA seller concessions cap at 4% (vs 6% for FHA, 3-9% for conventional). Important if you’re negotiating help with closing costs.
Related tools
- Mortgage Calculator: model different rate/down/term scenarios
- Affordability: what you can qualify for under each program
- Property Type Impact: does your property type qualify?
- Credit Score LLPA Impact: only applies to conventional
- PMI Removal: handles all four MI types (PMI, FHA MIP, VA, USDA)
- Closing Cost Estimator: VA funding fee tier picker built in
Term definitions in the glossary.