Conventional vs FHA vs VA Loan — Side-by-Side Comparison
The loan type you choose affects everything: down payment, monthly cost, total interest, and closing costs. A VA loan with 0% down and no PMI saves a veteran $50,000+ over 30 years compared to a conventional loan with PMI. An FHA loan lets buyers with 580 credit scores into the market — but the lifetime mortgage insurance adds tens of thousands.
Run the numbers for your situation with the Mortgage Calculator.
Full Comparison Table
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Min down payment | 3–5% | 3.5% | 0% |
| Min credit score | 620 | 580 (3.5% down), 500 (10% down) | No minimum (lenders use 620+) |
| PMI/MIP | PMI until 20% equity | MIP for life of loan (if under 10% down) | No PMI; VA funding fee |
| PMI/MIP cost | 0.3–1.5% of loan/year | 1.75% upfront + 0.55%/year | 1.25–3.3% funding fee (one-time) |
| Rates (2026) | 6.5–7.5% | 6.3–7.3% | 6.0–7.0% |
| Max DTI | 36–45% | 43–50% | 41% (guideline) |
| Property requirements | Appraisal | Stricter HUD standards | VA appraisal (MPR) |
| Eligible buyers | Anyone | Anyone | Veterans, active military, eligible spouses |
| Loan limits | $766,550 (conforming, 2025) | $498,257–$1,149,825 | No limit (with full entitlement) |
Total Cost Comparison: $350,000 Home
| Cost Item | Conventional (5% down) | FHA (3.5% down) | VA (0% down) |
|---|---|---|---|
| Down payment | $17,500 | $12,250 | $0 |
| Loan amount | $332,500 | $337,750 | $350,000 |
| Upfront fee/MIP | $0 | $5,911 (MIP) | $4,375–$8,750 (funding fee) |
| Monthly P&I | $2,152 | $2,186 | $2,266 |
| Monthly PMI/MIP | $220 (until 20% equity, ~7 years) | $155 (for life of loan) | $0 |
| Total cost (30 years) | ~$809,000 | ~$843,000 | ~$815,760 |
VA wins despite the higher loan amount because there's no ongoing PMI. Conventional catches up once PMI drops off. FHA is the most expensive long-term due to lifetime MIP.
Which Should You Choose?
| Your Situation | Best Option |
|---|---|
| Veteran or active military | VA — 0% down, no PMI, lowest rates |
| Good credit (700+), 10%+ down | Conventional — competitive rates, PMI drops off |
| Good credit (700+), 5% down | Conventional — cheaper long-term than FHA |
| Credit score 580–619 | FHA — only option at 3.5% down |
| Credit score 500–579 | FHA — requires 10% down |
| High DTI (45%+) | FHA — most lenient DTI requirements |
| Buying a fixer-upper | FHA 203(k) — includes renovation financing |
Frequently Asked Questions
Can I refinance from FHA to conventional to drop MIP?
Yes — once you reach 20% equity and a 620+ credit score, refinancing to conventional eliminates the lifetime MIP. Many FHA borrowers plan for this at the 3–5 year mark.
Is the VA funding fee worth it compared to PMI?
Usually yes. The VA funding fee is one-time (can be rolled into the loan) while PMI is monthly. Over time, no PMI saves far more than the upfront fee costs — especially on loans held more than 5 years.
5-Year Total Cost Comparison: $350K Home
| Cost Over 5 Years | Conventional (5% down) | FHA (3.5% down) | VA (0% down) |
|---|---|---|---|
| Down payment | $17,500 | $12,250 | $0 |
| Monthly P&I (60 months) | $129,120 | $131,160 | $135,960 |
| PMI/MIP (60 months) | $13,200 (drops after ~year 7) | $9,300 | $0 |
| Upfront fees | $0 | $5,911 | $8,750 |
| Total 5-year outlay | $159,820 | $158,621 | $144,710 |
| Equity built (approx.) | $25,000 | $23,000 | $21,000 |
Over 5 years, the VA loan saves $15,000+ compared to conventional — primarily because there's no down payment and no monthly PMI. Even with the one-time funding fee, the VA loan's lower rate and zero PMI create the lowest total cost for eligible borrowers. Veterans and active-duty service members who don't use the VA loan benefit are leaving significant money on the table.
The most expensive loan-type mistake is staying in an FHA loan longer than necessary. FHA's lifetime MIP (mortgage insurance premium) means you pay 0.55% of the loan balance every year for the entire 30 years — even after reaching 80% loan-to-value. Once you hit 20% equity and have a 620+ credit score, refinancing to a conventional loan eliminates the MIP entirely. On a $340K balance, that saves $1,870/year — $37,400 over the remaining 20 years.
Can I switch from one loan type to another?
Yes, through refinancing. You can refinance an FHA loan to conventional (to drop MIP), a conventional to VA (if you become eligible), or any type to any other. VA borrowers can use the VA Interest Rate Reduction Refinance Loan (IRRRL) — a streamlined process with minimal paperwork and no appraisal requirement. Each switch resets the loan term, so consider refinancing to a shorter term to avoid restarting the 30-year clock.
What if I'm a veteran but also qualify for a better conventional rate?
Compare both options including all costs. VA loans typically offer rates 0.25–0.50% lower than conventional, which matters over 30 years. However, if you have 20%+ down payment and excellent credit, a conventional loan avoids the VA funding fee (1.25–3.3% of the loan) entirely. On a $350K loan, the funding fee could be $4,375–$11,550. In rare cases where the funding fee exceeds the rate savings, conventional might cost less — but for most VA-eligible borrowers, the VA loan wins.
Calculate your monthly payment with the Mortgage Calculator. For down payment help, see First-Time Home Buyer Programs 2026. For understanding DTI requirements, read DTI Ratio for a Mortgage.
Official Resources
- CFPB — Consumer financial protection and mortgage tools
- HUD — Housing and urban development resources
This article is for informational purposes only. Real estate decisions involve significant financial commitments — consult a qualified professional for personalized guidance.
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