What is an FHA loan?
An FHA loan comes from a private lender, and the Federal Housing Administration regulates and insures it. The FHA doesn't lend the money directly.
FHA's basic program insures loans to buy or refinance a home you live in as your main home. The home can have one to four units.
FHA loans allow low down payments and lower credit scores than most conventional loans. You still need to meet FHA's standard credit rules. FHA's maximum loan amount varies by county.
Sources: Consumer Financial Protection Bureau, "FHA loans"; U.S. Department of Housing and Urban Development, "HUD 203(b) Mortgage Insurance"
What is a conventional loan?
A conventional loan is a home loan that isn't part of a specific government program. The most common kind is a conforming loan.
Conforming loans have maximum loan amounts set by the government. Fannie Mae or Freddie Mac, the companies that back conforming loans, set their other rules.
Non-conforming loans are conventional loans that don't fit those standards. Their rules, pricing, and features can vary widely from lender to lender.
Source: Consumer Financial Protection Bureau, "Conventional loans"
How is mortgage insurance different on FHA and conventional loans?
Every FHA loan requires FHA mortgage insurance. It has an upfront part paid at closing and a monthly part in your payment. Your credit score doesn't change its price.
A conventional loan typically needs private mortgage insurance, or PMI, when your down payment is less than 20 percent. PMI rates depend on your down payment and credit score. The CFPB says PMI is generally cheaper than FHA mortgage insurance for borrowers with good credit.
The rules for ending mortgage insurance differ too. Under federal law, PMI on many conventional loans can be canceled, or ends on its own, once the balance is paid down to set points. How long FHA's monthly premium lasts depends on the loan's case number date, its term, and the loan size compared with the home's value.
Sources: Consumer Financial Protection Bureau, "FHA loans"; Consumer Financial Protection Bureau, "Conventional loans"; Consumer Financial Protection Bureau, "What is mortgage insurance and how does it work?"; Consumer Financial Protection Bureau, "When can I remove private mortgage insurance (PMI) from my loan?"; U.S. Department of Housing and Urban Development, "Loan Balance at Final MIP Date - Final Monthly MIP Payment Date"
Which one costs less?
Which loan costs less depends on your credit and your down payment. The CFPB says that for borrowers with good credit and a medium-size down payment, FHA loans tend to cost more than conventional loans.
For borrowers with lower credit scores or a smaller down payment, the CFPB says an FHA loan can often be the cheapest option. It also says there are no hard-and-fast rules, and a lot depends on the current market.
The CFPB suggests asking lenders for quotes on both kinds of loans and comparing the total costs. Every lender uses the same standard Loan Estimate form, which makes offers easier to compare.
Sources: Consumer Financial Protection Bureau, "FHA loans"; Consumer Financial Protection Bureau, "What is a Loan Estimate?"
Where these facts come from
- Consumer Financial Protection Bureau, "FHA loans". Opened October 27, 2026.
- Consumer Financial Protection Bureau, "Conventional loans". Opened October 27, 2026.
- U.S. Department of Housing and Urban Development, "HUD 203(b) Mortgage Insurance". Opened October 27, 2026.
- Consumer Financial Protection Bureau, "What is mortgage insurance and how does it work?". Opened October 27, 2026.
- Consumer Financial Protection Bureau, "When can I remove private mortgage insurance (PMI) from my loan?". Opened October 27, 2026.
- U.S. Department of Housing and Urban Development, "Loan Balance at Final MIP Date - Final Monthly MIP Payment Date". Opened October 27, 2026.
- Consumer Financial Protection Bureau, "What is a Loan Estimate?". Opened October 27, 2026.
Disclaimer
These resources are general educational information and do not constitute financial, legal, or tax advice, or a commitment to lend. Texas-specific items are flagged for compliance review. Discuss your situation with Lending 11 Up and qualified professionals.