Here's the number nobody puts in the headline: on a $350,000 loan, the insurance cost alone can run anywhere from about $160 a month to over $400 a month, depending on which loan you pick and what your credit score looks like. Same house. Same loan amount. A gap that size, every month, for years.

So "FHA or conventional" isn't really the question. The real question is where your credit score and down payment land you on each program's pricing curve — because that's what decides which one is cheaper. Not brand loyalty, not what your cousin used, not whichever loan officer called you back first.

Let's run the math.

The two programs, in plain terms

An FHA loan is a mortgage insured by the Federal Housing Administration, a part of HUD. The government doesn't lend you the money (a regular bank or lender does), but if you default, FHA covers part of the lender's loss. That guarantee is why FHA can accept lower credit scores and smaller down payments than most conventional lenders will.

A conventional loan isn't backed by any government agency. It either gets sold to Fannie Mae or Freddie Mac (the two entities that buy most U.S. mortgages and set the rules for them) or stays with the original lender. Because there's no government backstop, conventional lenders lean harder on your credit score and down payment to manage their risk, and price accordingly.

Both loans require mortgage insurance when you put down less than 20%. FHA calls it MIP (mortgage insurance premium). Conventional calls it PMI (private mortgage insurance). They function the same way (protecting the lender if you default), but they're priced, and removed, completely differently. That difference is where most of the "which is cheaper" answer actually lives.

What FHA really costs

FHA down payments start at 3.5%, available to borrowers with a credit score of 580 or higher. Drop below 580, down to a floor of 500, and FHA still works, but the down payment requirement jumps to 10% (NerdWallet). That 500-score floor is genuinely lower than almost anything conventional lenders will touch.

Then there's the insurance, and this is where FHA gets expensive in a way a lot of first-time buyers don't see coming. Every FHA loan carries an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, paid at closing or (more commonly) rolled into the loan balance (HUD Mortgagee Letter 2023-05). On top of that, you pay an annual MIP, billed monthly, currently 0.55% of the loan balance per year for a standard 30-year loan with the typical 3.5% down payment (as of September 2026, per the same HUD mortgagee letter, which still governs current rates).

What nobody tells you upfront: if you put down less than 10%, that annual MIP doesn't go away. Ever. It runs for the life of the loan — not 11 years, not until you hit some equity milestone, but until you sell, refinance, or pay the thing off entirely. Put down 10% or more and it does cancel, but only after 11 years, regardless of how much equity you've built by then (The Mortgage Reports). Most FHA borrowers put down the minimum 3.5%. Most FHA borrowers, in other words, are stuck with MIP indefinitely unless they refinance out of it later.

FHA also caps how much you can borrow. For 2026, the floor is $541,287 in lower-cost areas and the ceiling is $1,249,125 in the most expensive counties, with everything in between set by local home prices (HUD, 2026 loan limits announcement). Check your specific county before assuming FHA covers your price range — HUD's loan limit lookup tool updates live as new figures roll out.

What conventional really costs

Conventional loans go as low as 3% down through programs like Fannie Mae's Conventional 97, aimed mostly at first-time buyers (The Mortgage Reports). For years, 620 was the hard floor for credit score. That's shifted: Fannie Mae has moved toward more holistic underwriting, weighing reserves and payment history alongside the score itself (Rocket Mortgage). In practice, plenty of lenders still enforce their own 620-ish floor on top of that, so don't assume the official change gets you approved below it.

PMI is where conventional pricing gets personal. Unlike FHA's flat MIP rate, PMI is priced almost entirely off your credit score and loan-to-value ratio (LTV, the percentage of the home's value you're borrowing). Roughly speaking, PMI runs from about 0.19% to 1.86% of the loan amount annually, and where you land in that range depends heavily on your score (The Mortgage Reports). Good credit, cheap PMI. Mediocre credit, expensive PMI. There's no upfront premium equivalent to FHA's UFMIP. PMI is typically a monthly cost only.

The other real difference: PMI ends. Under the federal Homeowners Protection Act, lenders must automatically terminate PMI once your loan balance is scheduled to hit 78% of the home's original value, as long as you're current on payments. You can also request cancellation yourself once you actually reach 80% LTV, provided you've got a clean payment history and no second lien on the property (NCUA). Pay extra toward principal, or let the market push your home's value up, and you can get there faster. FHA gives you no such lever if your down payment was under 10%.

DTI: where FHA actually has the edge

DTI, or debt-to-income ratio, is how much of your gross monthly income goes toward debt payments, including the new mortgage. FHA's standard ceiling is 43%, but it'll stretch to 50% for borrowers with compensating factors — strong credit, extra reserves, additional income (Rocket Mortgage).

Conventional loans can technically go just as high. Fannie Mae's automated underwriting allows up to 50% DTI on most files, but manually underwritten loans cap out at 36%, stretching to 45% only with strong credit and documented reserves (Fannie Mae Selling Guide). The ceilings look similar on paper. The difference shows up for borrowers who don't sail through automated underwriting cleanly: thin credit files, self-employment income, inconsistent history. FHA tends to be more forgiving there. Conventional's flexibility is real, but it's earned, not offered.

Run the math: $350,000 loan, two credit tiers

Here's where "it depends" turns into actual numbers. Same $350,000 loan amount, two different credit profiles, insurance costs only (rate differences are a separate factor covered in the credit score article linked above).

FHA, any credit score 580+, 3.5% down:

• UFMIP: $6,125, paid at closing or financed into the loan
• Annual MIP: 0.55% = $1,925/year = about $160/month, for the life of the loan (since the down payment is under 10%)

FHA's MIP rate doesn't move based on your score. A 580 borrower and an 800 borrower pay the exact same $160 a month.

Conventional, 660 credit score, 5% down:

• PMI: roughly 1.42% annually = about $413/month, no upfront cost, cancels around 78-80% LTV

Conventional, 740+ credit score, 5% down:

• PMI: roughly 0.58% annually = about $168/month, no upfront cost, cancels around 78-80% LTV

At 740+, conventional and FHA land within about $8 a month of each other. Close enough that the deciding factor is the cancellation clause: conventional's PMI eventually ends, FHA's doesn't (not with under 10% down). Strong credit tips this toward conventional, and usually the interest rate does too. Conventional pricing rewards top scores more aggressively than FHA does (The Mortgage Reports).

At 660, it's not close. FHA runs about $253 less per month than conventional PMI at that score, over $3,000 a year. Yes, you're carrying FHA's $6,125 upfront premium that conventional doesn't charge. Divide that upfront cost by the monthly savings and you get your breakeven: about 24 months. Stay in the house longer than two years, which almost everyone does, and FHA wins outright at this credit tier, life-of-loan MIP and all.

That's the actual shape of the answer. Not "FHA is cheaper" or "conventional is cheaper." A line that crosses somewhere in the 680-700 range for most borrowers, and which side you land on depends on your score, not on which loan sounds more official.

For context on where rates themselves stand right now: the 30-year fixed conventional rate averaged 6.66% as of late August 2026, according to Freddie Mac's weekly survey (as of September 2026). Check that page directly, since it updates every week and the number you see today won't match this one for long.

What actually moves the needle

If your score sits comfortably above 700 and you can put down 5% or more, run conventional numbers first. The PMI is cheaper at that tier and it goes away entirely once you've earned the equity.

If your score is in the 580-679 range, or your down payment is going to be closer to 3.5% than 10%, price out FHA before you assume conventional PMI is the better deal — the flat MIP rate can undercut credit-scored PMI by a wide margin at exactly the scores where conventional gets expensive.

And if your score sits right on the edge, 690-710 or so, get quotes on both. Not estimates — actual Loan Estimates from a lender, with your real credit pull and your real numbers. That $8-a-month gap in the example above can flip either direction with a slightly different rate sheet on a slightly different day.