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, <5% down: 3.30%
- IRRRL streamline refi: 0.50%
- Exempt: veterans with service-connected disability rating
- 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.