Facts and figures can change
Both can work for first-time buyers — the right one depends on your credit, savings, and how long you plan to stay in the home.
They solve for different things
Conventional loans follow guidelines set by Fannie Mae and Freddie Mac and are offered by nearly every lender. FHA loans are insured by the Federal Housing Administration, which allows lenders to approve buyers with lower credit scores and smaller down payments than many conventional programs. Neither is universally 'better' — they solve for different starting points.
Where FHA tends to help
If your credit history is shorter or less than perfect, or your savings for a down payment are limited, FHA's more flexible guidelines can open doors that a conventional loan might not. The tradeoff is mortgage insurance (MIP) that, unlike conventional PMI, often lasts for the life of the loan unless you refinance later.
Where conventional tends to help
If your credit and savings are stronger, a conventional loan may end up costing less over time, since PMI can be removed once you reach enough equity — unlike FHA's MIP. Conventional loans are also more flexible for buying investment or second homes down the road.
Questions worth asking your lender
Ask what your estimated payment looks like under each option, including mortgage insurance. Ask how long you'd likely pay that insurance under each program. And ask how your specific credit score and savings affect what you'd actually qualify for — general rules of thumb matter less than your real numbers.
Frequently asked questions
No — FHA loans aren't restricted to first-time buyers, though they're commonly used by them because of the more flexible credit and down payment guidelines.
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Sources
- FHA Loans — U.S. Department of Housing and Urban Development
- Conventional Loans — Consumer Financial Protection Bureau
Ashten Tucker
Founder, First Keys · Michigan Realtor
Ashten founded First Keys after seeing how overwhelming the homebuying process can feel for first-time buyers. He writes to make mortgages, contracts, and closing costs make sense in plain English.