FHA vs. Conventional Loans: Pros, Cons and Differences

FHA loans allow lower credit scores and are easier to qualify for. Conventional loans allow lower down payments.
Kate Wood
Hal M. Bundrick, CFP®
By Hal M. Bundrick, CFP® and  Kate Wood 
Updated
Edited by Alice Holbrook Reviewed by Michelle Blackford

Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.

Some buyers may believe that FHA loans are for first-time home buyers and conventional mortgages are for more established buyers. However, both types of loans have their advantages for any buyer, though qualification requirements differ.

FHA loans are insured by the Federal Housing Administration, and conventional mortgages aren't insured by a federal agency; instead, a lender assumes the risks associated with issuing the loan. 

Here are the factors to weigh when considering an FHA loan versus a conventional loan.

Mortgage loans from our partners

Rocket Mortgage - PURCHASE logo
Check Rate

on Rocket Mortgage

Rocket Mortgage

4.0

NerdWallet rating 
Rocket Mortgage - PURCHASE logo

4.0

NerdWallet rating 
Min. credit score 
620

Min. down payment 
1%

Check Rate

on Rocket Mortgage

NBKC - PURCHASE logo
Check Rate

on NBKC

NBKC

4.5

NerdWallet rating 
NBKC - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on NBKC

Guaranteed Rate - PURCHASE logo
Check Rate

on Guaranteed Rate

Guaranteed Rate

5.0

NerdWallet rating 
Guaranteed Rate - PURCHASE logo

5.0

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on Guaranteed Rate

How to compare FHA vs. conventional loans

FHA loans and conventional loans each have their own distinct requirements that borrowers need to meet in order to qualify. FHA loans have more flexible standards for things such as down payments and credit scores. Rates and mortgage insurance requirements also differ between the two types of loans, as do refinancing requirements. 

Here are some key differences between FHA and conventional loans.

» MORE: See if you meet FHA loan requirements

Video preview image

Minimum down payments and credit scores

FHA loans are usually easier to qualify for, requiring a minimum credit score of 580 to be eligible to make a 3.5% down payment. If your credit score is 500 to 579, you may qualify for an FHA loan with a 10% down payment.

Some conventional mortgages offer a slightly lower 3% down payment, but they typically require a credit score of 620 or higher.

Keep in mind that though the FHA sets minimum scores, lenders may require higher ones. And with both conventional loans and FHA loans, you'll be more likely to qualify and be offered a better interest rate with a higher credit score.

» MORE: Learn more about FHA down payments

Debt-to-income ratios

Your debt-to-income ratio, or DTI, is the percentage of your monthly pretax income that you spend to pay your debts, including your mortgage, student loans, auto loans, child support and minimum credit card payments. The higher your DTI, the more likely you are to struggle with your bills.

You’re more likely to qualify for an FHA loan with a DTI ratio of 50% or less, but some borrowers qualify with one above 50%. Lenders prefer borrowers to have DTIs of 36% or less for conventional mortgages, though in some cases, some lenders allow DTIs up to 50% but typically not above it.  

Mortgage loans from our partners

Rocket Mortgage - PURCHASE logo
Check Rate

on Rocket Mortgage

Rocket Mortgage

4.0

NerdWallet rating 
Rocket Mortgage - PURCHASE logo

4.0

NerdWallet rating 
Min. credit score 
620

Min. down payment 
1%

Check Rate

on Rocket Mortgage

NBKC - PURCHASE logo
Check Rate

on NBKC

NBKC

4.5

NerdWallet rating 
NBKC - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on NBKC

Guaranteed Rate - PURCHASE logo
Check Rate

on Guaranteed Rate

Guaranteed Rate

5.0

NerdWallet rating 
Guaranteed Rate - PURCHASE logo

5.0

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on Guaranteed Rate