FHA vs. Conventional Calculator

How FHA and conventional loans actually differ

The choice between an FHA loan and a conventional loan is the most-searched mortgage question in the United States, and for good reason: on the same house, the two programs can differ by tens of thousands of dollars over the life of the loan. The programs differ in three places — how much cash you need on day one, how the lender prices your risk, and how long mortgage insurance lasts.

FHA loans are insured by the Federal Housing Administration. Because the government absorbs part of the loss, lenders approve borrowers with credit scores down to 580 (for the 3.5% minimum down payment) and higher debt-to-income ratios. The trade-off is mortgage insurance in two forms: an upfront premium of 1.75% of the loan that is normally financed into the balance, and an annual premium charged in monthly installments that can last the life of the loan.

Conventional loans follow Fannie Mae and Freddie Mac guidelines and are not government-insured. Lenders price your credit risk directly into the interest rate — a 780 FICO borrower gets a meaningfully better rate than a 680 borrower — and require private mortgage insurance (PMI) whenever the down payment is under 20%. The upside is that PMI is temporary: it cancels automatically at 78% of the original value and can be requested at 80%.

Neither program is universally better. FHA is usually cheaper for credit-constrained or low-down-payment buyers; conventional is usually cheaper for strong credit once PMI falls away. This calculator prices both on your exact numbers.

How to use this calculator

1. Enter the home. Set the purchase price, loan term, annual property taxes, homeowners insurance, and any HOA dues. Closing costs default to 2.5% of the price — adjust to your loan estimate. These inputs feed both columns so the comparison stays apples-to-apples.
2. Set the FHA loan. Start with the minimum 3.5% down and your best rate quote. Leave the upfront MIP at 1.75% (the current standard) unless your lender quotes otherwise, and set the annual MIP — 0.55% is typical for a 30-year loan above 95% loan-to-value, while shorter terms and lower LTVs price lower.
3. Set the conventional loan. Enter the down payment you actually have — notice how PMI pricing responds to a larger one — plus the conventional rate quote and the PMI premium. If 20% down waives PMI, set the annual PMI to 0.00% and the calculator will show no insurance at all.
4. Read the summary. The two big numbers are the total monthly housing payment for each program, including taxes, insurance, and HOA. The pill underneath tells you which program costs less overall and by how much, per month and across the term.
5. Inspect the insurance clocks. The comparison table shows the month each loan's mortgage insurance ends and the total premium paid. FHA with less than 10% down shows "life of the loan" — that single row often decides the comparison.
6. Stress-test both sides. Nudge the FHA rate down and the conventional rate up, or add five points of down payment. The break-even rarely sits where people expect it.

Formulas & methodology

Every figure comes from the formulas below. All math runs locally in your browser — nothing you enter is sent to a server.

Mortgage insurance is modeled exactly as the programs define it. FHA MIP runs for the life of the loan when the initial loan-to-value exceeds 90% — the case at 3.5% down — and for 11 years (132 payments) at 10% down or more. Conventional PMI runs until the scheduled balance first reaches 78% of the original purchase price, which the calculator finds month by month from your amortization schedule. Taxes, insurance, and HOA dues are included in the monthly comparison but excluded from the "cost of the loan" chart, because they are identical on both sides.

Worked example

Take a $350,000 home with a 30-year term, $4,200 of property tax, and $1,600 of insurance. The FHA scenario puts 3.5% down at 6.25%, and the conventional scenario puts 5% down at 6.625%.

FHA finances a 1.75% upfront premium into the balance, producing a $343,661 loan against a $332,500 conventional loan. Cash to close is $21,000 for FHA versus $26,250 for conventional — about $5,250 more for conventional, most of it the larger down payment.

Monthly, FHA costs $2,757 against $2,751 for conventional. The interesting part is the insurance clock: FHA MIP at 0.55% runs for the life of the loan, totaling $56,546, while conventional PMI at 0.5% ends at month 137 and totals $18,980. Over the full term, including every payment and the cash to close, the FHA loan costs $839,456 and the conventional loan costs $842,577 — a difference of $3,121.

MIP vs. PMI: the rules that decide the comparison

FHA mortgage insurance (MIP) comes in two parts. The upfront premium is 1.75% of the base loan and is added to the balance, so it raises both the loan amount and the interest you pay on it for decades. The annual premium ranges roughly from 0.15% to 1.10% depending on loan amount, loan-to-value, and term, and is charged as one-twelfth of that rate every month. With 3.5% down, both premiums last for the entire life of the loan.

Conventional PMI is quoted per borrower — typically 0.2% to 1.5% annually, higher for lower credit scores, higher LTVs, and single-family owner-occupancies versus investments. Under the Homeowners Protection Act, servicers must cancel PMI automatically once the balance reaches 78% of the original value, and borrowers may request cancellation at 80% with a good payment history and a current appraisal.

This is why the same borrower can flip the winner by changing one input. Add five points of down payment to the conventional column and PMI shrinks and ends sooner; drop the FHA down payment to 3.5% and MIP never ends. Try it with the sliders — the total-cost bar redraws instantly.

Which loan wins, and when

• FHA usually wins below about a 680 credit score. Conventional rate pricing adds significant risk-based pricing (loan-level price adjustments) for lower scores, often wiping out FHA's higher insurance cost.
• Conventional usually wins with 10–20% down and good credit. PMI ends on schedule while FHA MIP continues, so the lifetime cost gap widens every month after year eleven.
• FHA wins on cash-to-close when the seller will pay concessions. FHA allows seller concessions up to 6% of the price, versus 3% on conventional, which can cover prepaid escrows and closing costs.
• Consider the exit. If you plan to sell or refinance within three to five years, the loan with the lower cost over that window wins — not over thirty. The term selector in the calculator shows how a 15-year amortization changes the insurance math dramatically, because the balance reaches 78% much sooner.
• Watch the DTI, not just the rate. FHA's 43–50% debt-to-income tolerance can be the deciding factor when conventional underwriting says no, regardless of which column is cheaper.

Investor FAQ

What is the difference between an FHA and a conventional loan?

An FHA loan is insured by the Federal Housing Administration, which lets lenders approve borrowers with lower credit scores and smaller down payments in exchange for mortgage insurance that lasts years — sometimes for the life of the loan. A conventional loan is not government-insured; it follows Fannie Mae and Freddie Mac guidelines, prices risk through the interest rate, and cancels private mortgage insurance automatically once you reach 78% of the original value.

Is FHA or conventional cheaper overall?

It depends on your credit, down payment, and how long you keep the loan. FHA usually wins for borrowers with credit under about 680 or less than 10% down, because conventional rate pricing degrades sharply below 740. Conventional usually wins for strong credit with 10–20% down, because PMI drops off while FHA MIP may never do so. Run both columns in the calculator with your real quotes — the difference is often thousands of dollars over the term.

How much do you need for a down payment on an FHA loan?

3.5% of the purchase price with a credit score of 580 or higher, or 10% with a score between 500 and 579. On a $350,000 home that is $12,250 down, plus closing costs — although seller concessions and down payment assistance programs can cover part of the cash-to-close gap. FHA also charges a 1.75% upfront mortgage insurance premium, which is normally financed into the loan rather than paid in cash.

Does FHA mortgage insurance ever go away?

Yes, but only in limited cases. If you put at least 10% down, the annual premium is removed after 11 years. With less than 10% down, MIP runs for the entire life of the loan, and the only way to end it is to refinance into a conventional loan once you have 20% equity. Conventional PMI, by contrast, cancels automatically at 78% loan-to-value of the original price and can be requested at 80%.

Can real estate investors use an FHA loan?

Only as an owner-occupant. FHA loans require you to move in within 60 days and live there for at least 12 months, so they do not fit a pure rental purchase. The common investor use is house hacking: buy a two- to four-unit property, live in one unit, rent the rest, then move out after meeting the occupancy requirement and refinance into conventional financing.

FHA vs. Conventional by state

Each state edition starts from that state's typical home price, rent, property tax, and insurance, with a worked example and notes on local rules.

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