Property and Borrower Profile
3.5%
Loan Rates and Fees
FHA Loan
Conventional Loan
Side-by-Side Results
Best Total Cost
FHA Loan
Total Monthly Payment (P&I + MIP)
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Initial Loan Amount --
Upfront Funding Fee (added to loan) --
Total MI Paid (Lifetime) --

Total Interest Paid --
Total Cost Over Life of Loan --
Best Total Cost
Conventional Loan
Total Monthly Payment (P&I + PMI)
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Initial Loan Amount --
Upfront Funding Fee None
Total PMI Paid (Lifetime) --

Total Interest Paid --
Total Cost Over Life of Loan --
Estimates are for educational purposes only and are not financial advice. Actual loan costs vary based on lender, location, loan limits, and individual underwriting. Consult a licensed mortgage professional before making borrowing decisions.
Key Terms Explained
FHA Loan
A mortgage insured by the Federal Housing Administration. Designed for lower-credit or lower-down-payment borrowers, with a minimum 3.5% down and a 580+ credit score.
Conventional Loan
A mortgage not backed by a government agency. Typically requires stronger credit (620+), but offers more flexibility and can eliminate mortgage insurance once you reach 20% equity.
Private Mortgage Insurance (PMI)
Insurance required on conventional loans with less than 20% down. Protects the lender if you default. Cancels automatically when your balance reaches 78% of the original home price.
Mortgage Insurance Premium (MIP)
The FHA's version of mortgage insurance, paid both upfront (UFMIP) and annually. Unlike PMI, it may last for the life of the loan if your down payment is less than 10%.
Upfront Funding Fee (UFMIP)
A one-time 1.75% fee charged on FHA loans, rolled into the loan balance. It funds the FHA insurance program so the government agency can cover lender losses without taxpayer money.
Loan-to-Value (LTV)
The ratio of your loan balance to the home's appraised value. For example, a $320,000 loan on a $400,000 home is 80% LTV. Lenders use LTV to set insurance requirements and interest rates.
Amortization
The process of paying off a loan through fixed monthly payments over time. Each payment covers interest first; the remainder reduces the principal. Early payments are mostly interest; later ones are mostly principal.
P&I Payment
Principal and Interest - the core of your monthly mortgage payment. Does not include taxes, homeowners insurance, or HOA fees. This comparator calculates P&I plus mortgage insurance only.

The Complete Guide to FHA vs. Conventional Loans

Choosing between an FHA loan and a conventional loan is one of the most important financial decisions a homebuyer faces. The right answer depends on your credit score, available cash, how long you plan to keep the loan, and how much the lifetime cost of mortgage insurance matters to you. This guide explains the tradeoffs clearly so you can make an informed choice.

How to Use This Comparator

Start by entering your target home price and the down payment you have available. The percentage badge updates in real time to show your down payment as a percentage of the home price - this number drives several key decisions. Select your loan term and credit score tier, then adjust the interest rates and insurance rates in the "Loan Rates and Fees" panel to match quotes you have received from lenders. All results update instantly.

The two result cards show your estimated monthly payment (P&I plus mortgage insurance), lifetime insurance cost, lifetime interest, and total cost over the life of the loan. The card with the lower total cost is highlighted with a colored glow and a "Best Total Cost" badge.

Understanding the FHA Upfront Funding Fee

The FHA charges 1.75% of the base loan amount as an upfront mortgage insurance premium (UFMIP). On a $386,000 loan (from a $400,000 home with 3.5% down), that is approximately $6,755 rolled into your loan balance, making your actual loan about $392,755. You never write a check for this amount - it quietly inflates your starting balance, which is why this comparator shows both the base and final FHA loan amounts.

PMI vs. MIP: The Key Lifetime Cost Difference

The most important long-term difference between these two loan types is how mortgage insurance ends. On a conventional loan, PMI automatically cancels once your balance reaches 78% of the original purchase price based on your amortization schedule - often after 7 to 10 years on a 30-year loan. You do not need to take any action; your servicer is legally required to cancel it.

On an FHA loan, it is more complicated. If you put down less than 10%, MIP stays for the entire 30-year life of the loan. If you put down 10% or more, MIP drops after 11 years (132 payments). This comparator models both scenarios automatically based on your down payment percentage.

When a Conventional Loan Is Better

A conventional loan typically wins on total cost if your credit score is 700 or above and you can put down at least 5%. The PMI rate for excellent-credit borrowers (often 0.3% to 0.5%) is meaningfully lower than FHA MIP (typically 0.55%), and it cancels in a few years rather than potentially lasting forever. There is also no 1.75% upfront fee bloating your loan balance from day one.

When an FHA Loan Is Better

FHA loans are the practical choice when your credit score is below 680, your down payment is under 5%, or you need a lower interest rate to qualify. FHA rates are typically 0.25% to 0.50% lower than conventional rates for the same borrower profile, and the qualification standards are more forgiving on debt-to-income ratios and recent credit events. For buyers who plan to refinance within 5 to 7 years - before the lifetime MIP burden compounds - FHA can be the smarter short-term vehicle into homeownership.

Frequently Asked Questions

Why do FHA loans have an upfront funding fee? +
FHA loans are insured by the Federal Housing Administration, a government agency that does not use taxpayer money to cover defaults. Instead, the FHA funds its insurance program entirely through borrower premiums. The upfront mortgage insurance premium (UFMIP) of 1.75% of the base loan amount is the lump-sum portion of that insurance cost. It is rolled directly into the loan balance so borrowers do not need to pay it out of pocket at closing. This fee makes FHA lending possible for borrowers with lower credit scores or smaller down payments who might not qualify for conventional financing.
How do I get rid of PMI on a conventional loan? +
Private mortgage insurance on a conventional loan automatically cancels when your loan balance reaches 78% of the original home purchase price, based on your scheduled payment history. You can also request early cancellation once your balance reaches 80% LTV, provided you have a good payment history and, in some cases, a new appraisal confirming the home value has not declined. Refinancing when you have at least 20% equity is another common exit strategy. Unlike FHA MIP, conventional PMI is not a lifetime cost in most cases.
Does FHA mortgage insurance ever go away? +
It depends on your down payment. If you put down less than 10% on an FHA loan, the annual mortgage insurance premium (MIP) stays for the entire life of the loan and never cancels automatically. If you put down 10% or more, MIP is automatically removed after 11 years (132 monthly payments). This is one of the key long-term cost differences between FHA and conventional loans. Borrowers who want to eliminate FHA MIP earlier must refinance into a conventional loan once they have sufficient equity.
Which loan is better for a first-time homebuyer? +
The better loan depends on your credit score, down payment, and how long you plan to keep the loan. FHA loans are generally easier to qualify for, accepting credit scores as low as 580 with a 3.5% down payment, and their rates are often slightly lower. However, the upfront funding fee and potentially lifetime MIP make them more expensive over the long run. Conventional loans with 3% to 5% down and a strong credit score (700+) can be cheaper overall because PMI cancels automatically and there is no upfront fee. Use this comparator to run your specific numbers - the right answer is different for every borrower.