Finance

Federal Housing Administration (FHA) vs Conventional Loan — Which Costs Less on a $300,000 Home?

Compare FHA vs conventional loans in 2026. See mortgage insurance premium (MIP) vs private mortgage insurance (PMI), down payment rules, and payment impact. Free.

By Daily Calcs Team , Independent Editorial Research · Reviewed by Daily Calcs Editorial , Calculator Methodology Review · Published June 4, 2026 · Updated June 20, 2026 · 8 min read

Direct Answer

On a $300,000 home with 5% down, a conventional loan at 6.5% with PMI (private mortgage insurance) costs $2,137/month. An FHA (Federal Housing Administration) loan at 6.25% with mortgage insurance premium (MIP) costs $2,168/month. Conventional is $31/month cheaper after the first year and saves roughly $10,000 over 10 years if PMI drops off at 80% loan-to-value (LTV) ratio. FHA wins on upfront cost (3.5% vs. 5% minimum down) and credit flexibility (580 vs. 620 minimum score). Use the Mortgage Calculator to compare both loan types with your specific numbers.

Last verified on: June 21, 2026

Editorial note: This comparison uses mid-2026 rate data for FHA and conventional 30-year fixed loans. Actual rates and MIP (mortgage insurance premium) rates vary by lender, credit score, LTV (loan-to-value ratio), and loan amount. This guide does not cover VA (U.S. Department of Veterans Affairs), USDA (U.S. Department of Agriculture), jumbo, or portfolio loans.

Research method: Daily Calcs reviewed HUD FHA MIP requirements, Fannie Mae and Freddie Mac conventional guidelines, and current rate spreads from Freddie Mac PMMS (Primary Mortgage Market Survey, late May 2026). FHA rate assumption: 6.25% with 0.55% annual MIP. Conventional rate assumption: 6.5% with 0.65% PMI for LTV above 80%. All sources verified on June 21, 2026.

Side-by-Side Comparison: $300,000 Home

FHA (Federal Housing Administration)ConventionalWinner
Minimum down payment3.5% ($10,500)3% ($9,000)Conventional (slightly)
Minimum credit score580 (with 10% down for max)620FHA
Upfront mortgage insurance1.75% of loan ($5,063)$0Conventional
Monthly MIP / PMI rate0.55% annually0.65% annuallyFHA (rate)
Monthly insurance cost (5% down)$135$159FHA
Can insurance be canceled?No (unless 10%+ down)Yes (at 80% LTV)Conventional
Typical rate (mid-2026)6.25%6.5%FHA

MIP (mortgage insurance premium) is the FHA equivalent of PMI. LTV (loan-to-value ratio) is the loan amount divided by home value.

Total Cost Over Time

The long-term cost difference is driven almost entirely by mortgage insurance rules.

Scenario: $300,000 home, 5% down ($15,000), 30-year fixed

FHA (6.25%, 0.55% MIP)Conventional (6.5%, 0.65% PMI)
Upfront cash needed$15,563 (down 5% + MIP)$15,000 (down 5%, no upfront PMI)
Monthly P&I payment$1,756$1,799
Monthly MIP/PMI$135$159
Total monthly (P&I + insurance)$1,891$1,958
After PMI drops (year 11)*$1,891 (MIP continues)$1,799 (PMI canceled)
Total cost over 10 years$227,000$226,200
Total cost over 30 years$680,760$647,640

*Conventional PMI assumed canceled at month 131 (80% LTV with 5% down at 6.5%). FHA MIP with less than 10% down lasts the full 30 years.

The conventional loan saves roughly $33,000 over 30 years — primarily because PMI drops off after 11 years while MIP never does.

Credit Score Requirements

FHA is more forgiving of lower credit scores:

Credit scoreFHA eligible?Conventional eligible?
580-619✅ Yes (3.5% down)❌ No (min 620)
620-659✅ Yes✅ Yes (higher rate)
660-739✅ Yes✅ Yes (standard rate)
740+✅ Yes✅ Yes (best rate)

If your score is below 620, FHA is likely your only conventional option. At 660+, conventional is usually better because you avoid the upfront MIP and get cancelable PMI.

When FHA Wins

You have a credit score between 580 and 619

Conventional loans require a minimum 620 FICO (Fair Isaac Corporation) credit score. If your score is below that, FHA is the path to homeownership with only 3.5% down.

You need the lowest possible down payment

FHA’s 3.5% minimum requires less cash upfront than conventional’s typical 5% minimum for competitive rates. On a $300,000 home, that’s $10,500 vs. $15,000 before upfront MIP.

You plan to stay in the home for fewer than 5 years

The upfront MIP cost and permanent MIP matter less if you plan to sell or refinance before the conventional PMI would have dropped off.

When Conventional Wins

You have a 660+ credit score and 5%+ down

Conventional gives you cancelable PMI, no upfront premium, and lower long-term cost. Over 30 years, the savings reach $33,000 on a $300,000 loan.

You want payment flexibility after reaching 20% equity

Once your LTV hits 80%, you can request PMI cancellation. For a buyer with 5% down at 6.5%, that happens around year 11 with minimum payments. FHA MIP stays for life.

You are buying a condo or investment property

FHA has stricter property requirements and only covers owner-occupied primary residences. Conventional loans work for second homes, investment properties, and condos with broader eligibility.

Calculator Methodology

The comparison uses:

  • home price: $300,000
  • down payment: 5% ($15,000)
  • FHA rate: 6.25%, 30-year fixed, MIP at 0.55% annually, upfront MIP 1.75%
  • Conventional rate: 6.5%, 30-year fixed, PMI at 0.65% annually, no upfront PMI
  • Insurance assumed at $100/month for both
  • Property tax excluded (same for both loan types in same location)

Standard amortization formula:

Payment = P * r(1 + r)^n / ((1 + r)^n - 1)

Official and Supporting Sources

Next Step

Use the Mortgage Calculator to compare FHA and conventional scenarios with your credit score, down payment, and home price. Then model extra payments with the Amortization Calculator.

Frequently Asked Questions

FHA vs. conventional: Which loan type is cheaper overall?

For a $300,000 home with 5% down, an FHA loan at 6.25% with MIP costs about $2,168/month. A conventional loan at 6.5% with PMI costs about $2,137/month. Conventional is slightly cheaper per month, but FHA requires less cash upfront (3.5% vs. 5% minimum). Over 10 years, the conventional loan saves roughly $3,700 if PMI drops off at 80% LTV while FHA MIP lasts the loan life.

What is the difference between MIP and PMI?

MIP (mortgage insurance premium) applies to FHA loans and typically lasts the life of the loan if you put less than 10% down. PMI (private mortgage insurance) applies to conventional loans and can be canceled when your LTV (loan-to-value ratio) reaches 80%. MIP also requires a 1.75% upfront premium; PMI has no upfront premium.

Does FHA have a higher rate than conventional in 2026?

FHA rates are typically 0.25% to 0.50% lower than conventional rates because FHA loans are government-insured, reducing lender risk. In mid-2026, FHA 30-year fixed rates are around 6.25%, while conventional 30-year rates are around 6.5%. However, FHA's MIP costs offset much of that rate advantage.

How does the down payment compare between FHA and conventional?

FHA allows 3.5% down with a 580+ credit score. Conventional allows 3% down with 620+ FICO for first-time buyers. On a $300,000 home, FHA needs $10,500 down plus the 1.75% upfront MIP ($5,250). Conventional needs $15,000 down with no upfront PMI. FHA is cheaper upfront; conventional is cheaper long-term.

Can I cancel FHA mortgage insurance?

Only if you put 10% or more down — then MIP cancels after 11 years. With less than 10% down, MIP lasts the entire loan term. The only way to remove it early is to refinance into a conventional loan once you reach 20% equity. PMI on conventional loans can be requested for cancellation at 80% LTV.

Which loan type is better for first-time homebuyers in 2026?

FHA is better if you have a credit score below 620 or limited savings — the 3.5% minimum down and lower rate help buyers with smaller upfront cash. Conventional is better if you have a 660+ score and 5% down — lower lifetime cost, cancelable PMI, and no upfront MIP premium.

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