FHA vs Conventional Loans: 2025 Guide for US Homebuyers
Choosing the right mortgage is crucial for American homebuyers. In 2025, FHA and conventional loans are the most popular options. This guide compares down payment, credit score, rates, and which is best for your situation.
What Is an FHA Loan?
- Backed by the Federal Housing Administration
- Low down payment (3.5%)
- Minimum credit score: 580
- More flexible for first-time buyers
- Requires mortgage insurance (MIP)
What Is a Conventional Loan?
- Not government-backed
- Down payment: 3%–20%
- Minimum credit score: 620
- Lower rates for strong credit
- Private mortgage insurance (PMI) if <20% down
FHA vs Conventional: Key Differences
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Down Payment | 3.5% | 3%–20% |
| Credit Score | 580+ | 620+ |
| Mortgage Insurance | MIP (required) | PMI if <20% down |
| Loan Limits | $472,030 (2025) | $726,200 (2025) |
| Rates | Higher for low credit | Lower for strong credit |
How to Choose: FHA or Conventional?
- First-time buyer, low credit, small down payment: FHA
- Strong credit, larger down payment: Conventional
- Compare rates, fees, and insurance costs
- Consult a mortgage advisor
Key Takeaways
- FHA loans are best for first-time buyers with low credit and small down payments
- Conventional loans offer lower rates for strong credit and larger down payments
- Compare total costs, including insurance and fees
- Consult a mortgage advisor for personalized advice
Frequently Asked Questions
1. What is the minimum credit score for FHA?
580 for 3.5% down; 500 for 10% down.
2. Can I refinance from FHA to conventional?
Yes, if you build equity and improve your credit score.
3. Is mortgage insurance required?
FHA: MIP required; Conventional: PMI if <20% down.
4. What are 2025 loan limits?
FHA: $472,030; Conventional: $726,200.
5. Which is better for first-time buyers?
FHA is more flexible for first-timers with low credit or small down payment.
6. Can I get a conventional loan with bad credit?
Usually not; FHA is better for low credit.
7. How do I choose?
Compare rates, fees, and insurance; consult a mortgage advisor.
8. Can I use gift funds for down payment?
Yes, both FHA and conventional allow gift funds.
Abdullah Javed is Editor at AmericaPolicy. He writes on mortgage, real estate, and finance topics with 10+ years of industry experience.