Loan Types
FHA vs Conventional Loan: Which Is Right for You in 2025?
7 min read · 2025-04-14
Breaking down the real differences between FHA and conventional mortgages — and how to choose.
FHA and conventional loans are the two most common mortgage types in the US. Choosing between them can affect your monthly payment, total interest cost, and how much cash you need at closing.
FHA Loans: The Basics
FHA loans are backed by the Federal Housing Administration and allow credit scores as low as 500 (with 10% down) or 580 (with 3.5% down). The trade-off: FHA loans require mortgage insurance premium (MIP) for the life of the loan if you put less than 10% down.
Conventional Loans: The Basics
Conventional loans follow Fannie Mae and Freddie Mac guidelines. They require a minimum 620 credit score and 3% down. PMI is required below 20% down — but unlike FHA MIP, it can be removed once you reach 20% equity.
Side-by-Side Comparison
- FHA min credit: 500–580 vs. Conventional: 620
- FHA min down: 3.5% vs. Conventional: 3%
- FHA MIP: Required for life of loan vs. PMI: Removable at 20%
- FHA loan limit 2025: $498,257 vs. Conventional: $766,550
Rule of thumb: If your credit score is 660+ and you can put at least 5–10% down, a conventional loan will almost always cost less over time.
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