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What is an FHA loan?
An FHA loan is insured by the Federal Housing Administration. Because the government backs it, lenders can be more flexible — lower credit scores and a down payment as low as 3.5% are common. It's a popular first step for buyers who are still building credit or savings.
What is a conventional loan?
A conventional loan isn't government-insured; it follows Fannie Mae / Freddie Mac guidelines. It typically rewards stronger credit with better pricing, can start at 3% down, and — importantly — its mortgage insurance can be removed once you build about 20% equity.
Side by side
| Factor | FHA | Conventional |
|---|---|---|
| Min. down payment | 3.5% | 3% |
| Credit flexibility | More forgiving | Rewards higher scores |
| Mortgage insurance | MIP (often for the life of the loan) | PMI (removable at ~20% equity) |
| Best for | Building credit / lower down | Stronger credit / long-term cost |
| Property condition | Stricter appraisal standards | More flexible |
Mortgage insurance: PMI vs MIP
This is where the long-term difference often lives:
- Conventional → PMI. Added when you put down less than 20%, but it can usually be removed once you reach about 20% equity — so it's often temporary.
- FHA → MIP. FHA's mortgage insurance follows different rules and frequently stays for the life of the loan unless you refinance into a conventional loan later.
Key insight: Many buyers use FHA to get in the door, then build equity and refinance into a conventional loan to drop mortgage insurance.
Which one should you choose?
A rough rule of thumb:
- Lean FHA if your credit is still improving or you want the easiest path in with a small down payment.
- Lean conventional if your credit is solid and you want lower long-term cost and removable mortgage insurance.
But the real answer depends on your exact numbers. Compare both with a quick payment estimate, then ask Orange to run your scenario side by side. New to this? Start with the first-time buyer guide, or see how much down payment you really need.
