As a lender, I quote both FHA and conventional options for nearly every buyer, because the right answer depends on your credit profile, your down payment, and how long you'll keep the loan — not on which program is 'better' in the abstract. Here's how I actually compare them.

The quick version

  • FHA: 3.5% minimum down, friendlier on credit scores and debt-to-income, but mortgage insurance that usually stays for the life of the loan
  • Conventional: as little as 3% down for qualifying first-time buyers, pricing that rewards stronger credit, and mortgage insurance you can eventually remove

Down payment and credit

FHA's headline is flexibility: 3.5% down with credit scores that conventional pricing would punish. If your score is in the low-to-mid 600s, FHA often produces a meaningfully better rate and payment. Conventional loans start at 3% down for first-time buyers, but the pricing is risk-based — the loan gets cheaper as your score climbs. Somewhere around the 700s, conventional usually starts winning.

Mortgage insurance — where the real difference lives

FHA charges an upfront mortgage insurance premium of 1.75% of the loan amount (usually rolled into the loan) plus an annual premium — 0.55% for most buyers since the 2023 reduction, paid monthly. Here's the catch: with the minimum down payment, FHA mortgage insurance stays for the life of the loan. You don't outgrow it; you refinance out of it.

Conventional PMI has no upfront charge and is priced on your credit and down payment. More importantly, it's removable: you can request cancellation at 80% loan-to-value, and it drops automatically at 78%. In an appreciating market, buyers often get there faster than they expect.

The comparison I run for every buyer: same house, same down payment, both programs side by side — payment today, insurance cost over five years, and the exit plan for the insurance. Ten minutes of math beats any rule of thumb.

Michigan-specific wrinkles

Condos: FHA requires the condo project itself to be FHA-approved, and plenty of Metro Detroit associations aren't on the list. If you're condo shopping, we check this before you fall in love. Multi-units: FHA allows 3.5% down on 2–4 unit properties you'll live in — one of the best house-hacking tools available — though 3–4 unit buildings must pass FHA's self-sufficiency rent test.

So which one?

Rough guide from my desk: credit under ~680 or a tighter debt-to-income ratio, FHA probably wins today. Credit 720+ with even 5% down, conventional usually wins over time because the insurance dies. And the decision isn't permanent — plenty of my clients buy FHA, build equity, then refinance to conventional and drop the mortgage insurance once they reach 20%. The program you start with just needs to win the years you'll actually hold it.