Person holding a key and mortgage application form

FHA Loans vs. Conventional Mortgages: Which Should You Choose?

When it comes to financing a home using mortgages, homebuyers can choose between an FHA and a conventional mortgage. The former is backed or managed by the Federal Housing Administration, while the latter is an independent loan that is not insured by the government. Both have certain qualifications that borrowers need to meet.

If you’re wondering which loan is better, there is actually no specific answer. The right mortgage for you will depend on a number of factors, including your credit score, overall debt (DTI ratio), as well as your down payment. Home loan companies in Utah note that it is best to learn more about their differences to know which suits you best.

FHA Loans

The Federal Housing Administration manages and insures FHA loans. Do take note, however, that the FHA is not the one that offers the loan. It only insures lenders in case the borrower defaults on the loan. Compared to conventional mortgages, this loan has more lenient qualifications. It is a good option for those with low or less-than-stellar credit scores or borrowers with little down payment.


  • It allows a down payment of as little as 3.5%.
  • Borrowers with a credit score of 580 or lower can qualify for this loan.
  • It is ideal for those with high DTI (debt-to-income) ratio, or borrowers who spend more than 50% of their income on debt obligations (monthly).


  • You need to pay an insurance premium throughout the life of the loan. This can raise your monthly payment. You will need to refinance the mortgage to get rid of the premiums.

Conventional Mortgages

People discussing a mortgage loanThese are the most common type of mortgage for most buyers. These are given and managed by private lenders and favor those with good or excellent credit. It allows a down payment of 5% or lower depending on the lender and any private mortgage insurance (PMI) can be removed once the equity reaches 20%.


  • You can completely get rid of PMI, especially if you pay 20% down payment.
  • It can be used to buy different types of properties (e.g. family residence, rental property, vacation home).
  • It has lesser obstacles than FHA loans. While it is easy to qualify for an FHA loan (like lower credit and down payment), it has stricter appraisal standards.


  • You need to have good credit to a conventional loan. Some lenders approve those with a low score, but this usually comes with high interest rates.

Which One’s Better?

Based on the pros and cons listed above, some may declare that FHA loan is better than a conventional mortgage, mainly because of its flexible requirements.

If you think that this is the case, you have to take note that conventional loans are also cost-effective. It also encourages the borrower to be financially responsible to meet certain requirements. This is especially the case in saving up for bigger down payment and improving credit score before applying for a loan.

No loan is actually better than the other. It is best to look into your finances and situation to determine which suits your situation. It is also a good idea to talk to homeowners or a reliable lender to know more about your options.

Scroll to Top