The Core Difference

Conventional loans are originated by private lenders and follow guidelines set by Fannie Mae and Freddie Mac. FHA loans are also originated by private lenders, but insured by the Federal Housing Administration. That insurance lets lenders extend credit to borrowers with lower scores and smaller down payments.

3%
Min Conventional down
3.5%
Min FHA down
580
FHA credit min
620
Conventional min

Down Payment

  • Conventional: 3% minimum for first-time buyers (Fannie HomeReady / Freddie Home Possible), 5% for repeat buyers. 20% to avoid PMI.
  • FHA: 3.5% minimum with a credit score of 580+. 10% minimum if your score is 500–579.

FHA is more forgiving at the lowest credit tiers; Conventional is competitive at 3% if your credit is 720+.

Mortgage Insurance: PMI vs. MIP

This is where Conventional pulls ahead long-term.

  • Conventional PMI: Required with less than 20% down. Cost varies by credit score and LTV (0.3%–1.5% annually). Drops off automatically when you reach 78% LTV based on original value, or can be requested at 80%.
  • FHA MIP: Two parts — a 1.75% upfront premium financed into the loan, plus 0.55% annual MIP. Stays for the life of the loan if your down payment is less than 10%. Only way out is to refinance into a conventional loan.
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Quick Rule of Thumb

Credit under 680? FHA almost always wins. Credit 720+? Conventional almost always wins. The gray zone is where we run actual side-by-side numbers.

Credit Score Sensitivity

Conventional pricing is heavily risk-based: a 740 score gets dramatically better pricing than a 660. FHA pricing is much flatter — a 620 score and a 720 score pay similar rates and MIP.

Rough rule: below 680 credit → FHA usually wins. 720+ → Conventional usually wins. 680–720 is the gray zone where we run side-by-side numbers.

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Florida Condo Gotcha

FHA loans require the entire condo project to be FHA-approved — and many South Florida buildings aren't. Verify approval before falling in love with a unit.

Property and Occupancy

  • FHA is owner-occupied primary residences only. The property must meet FHA minimum property standards — peeling paint, broken HVAC, missing handrails will trigger appraisal requirements.
  • Conventional is available for primary, second home, and investment. Property condition rules are more flexible.

FHA-approved condos in Florida are a smaller universe than the full condo market. If you're shopping condos, check the approval status before getting attached to a unit.

Florida-Specific Notes

Florida's elevated insurance and tax costs affect both loans equally, but FHA's stricter property standards can be a real friction point on older homes and beach condos. We've seen FHA appraisals require thousands in seller-funded repairs that a Conventional appraisal wouldn't have flagged.

Over ten years, choosing the right loan can mean $20,000+ in your pocket. It's worth one extra conversation before you commit.

Worked Example

$400,000 home, 5% down ($20,000), 700 credit score, 30-year fixed at 7%:

  • Conventional: P&I ≈ $2,528, PMI ≈ $180/mo, total ≈ $2,708. PMI gone in ~9 years.
  • FHA: Loan amount with upfront MIP = $386,653. P&I ≈ $2,572, monthly MIP ≈ $174, total ≈ $2,746. MIP stays for life of loan (or until refinanced).

Conventional saves $38/month and drops PMI ~$2,160/year once you hit 20% equity. Over ten years that's $20,000+ in your pocket.

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