FHA vs Conventional Loans in 2026: Which Wins for Your Credit Score and Down Payment
FHA vs conventional loans in 2026: which wins for your credit score and down payment
Valley West Mortgage is a local mortgage broker, NMLS #65506, and is not affiliated with or acting on behalf of FHA, HUD, or any government agency. This article is editorial guidance; figures shown are illustrative examples — not a quote, offer, or commitment to lend.
Quick answer: In 2026, FHA vs conventional usually comes down to credit score. Mid-600s and below, FHA usually wins: its mortgage insurance is flat-priced, so a 660 score pays the same 0.55% MIP as an 800. Around 720 and up, conventional usually wins: PMI gets cheap, there's no 1.75% upfront fee, and unlike FHA insurance at 3.5% down, PMI cancels once you build 20% equity.
The two loans are closer than most Las Vegas buyers think — until you price the mortgage insurance. Down payments are nearly identical (3.5% vs 3%), rates are in the same neighborhood, and both work for first-time homebuyers. The real fork is how each program charges for risk: FHA charges everyone the same, conventional charges by credit score. Here's the side-by-side, the 2026 numbers, and one house priced both ways at two different scores.
Key takeaways
- Credit score decides: mid-600s and below usually FHA; 720+ usually conventional; the 680–720 band is worth pricing both ways (raising your score can flip the answer).
- Down payment is a near-tie: 3.5% FHA vs 3% conventional — on a $450,000 home that's a $2,250 difference.
- Mortgage insurance is the real difference: FHA adds 1.75% upfront (UFMIP) plus a flat 0.55% annual MIP at any score; conventional PMI is credit-priced and cancellable.
- 2026 Las Vegas limits: $541,287 FHA (Clark County, one unit) vs the $832,750 conforming baseline.
- FHAFHA loans in Las Vegas (2026)The local rulebook: who qualifies and what it costs.
How do FHA vs conventional loans compare in 2026?
Indeed, nine times out of ten the decision lives in two rows of this table: the credit floor and the mortgage insurance. Meanwhile, everything else — down payment, rates, property types — is close enough that it rarely tips the choice on its own.
| Factor | FHA | Conventional |
|---|---|---|
| Minimum down payment | 3.5% (with a 580+ score) | 3% (first-time-buyer or income-limited programs; otherwise typically 5%) |
| Credit score floor | 580 (500–579 possible with 10% down) | 620 |
| Upfront mortgage insurance | 1.75% UFMIP, usually financed into the loan | None |
| Monthly mortgage insurance | Flat 0.55% annual MIP at 3.5% down (0.50% with 5%+ down) — same price at every credit score | Credit-priced PMI — inexpensive at 760+, costly in the mid-600s |
| When the insurance ends | Under 10% down: life of the loan — refinancing is the exit. 10%+ down: after 11 years | Cancel by request at 80% LTV; ends automatically at 78% (Homeowners Protection Act) |
| 2026 loan limit (one unit) | $541,287 in Clark County, Nevada | $832,750 conforming baseline |
| Debt-to-income flexibility | More forgiving — higher DTIs approved with compensating factors | Typically to ~45%, up to ~50% with strong automated approval |
| Who it usually fits | Scores in the mid-600s and below, thinner credit, higher DTI | Scores around 720+, wants the MI to cancel, higher-priced homes |
What credit score do you need for FHA vs conventional?
The floors are 580 for FHA (with 3.5% down) and 620 for conventional — but the floors aren't the real story. In contrast, conventional pricing is tiered: agency loan-level price adjustments mean a 660 score with a small down payment pays a meaningfully worse rate and a much bigger PMI premium than a 760 score on the identical house. FHA runs the opposite way — the 1.75% upfront premium and the 0.55% annual MIP are the same whether you're at 590 or 800. That's why the crossover usually sits around the high-600s to low-700s: below it, FHA's flat pricing is a subsidy; above it, it's a tax. If you're near a tier edge, a 20–40 point score improvement before you apply can flip which loan wins.
Worked example: one $450,000 house, two credit scores
Same Las Vegas house, same illustrative 6.5% rate on a 30-year fixed — only the credit score changes. For instance, FHA: 3.5% down is $15,750, leaving a $434,250 base loan; adding the 1.75% upfront premium (UFMIP ≈ $7,599, financed) makes it $441,849. Conventional: 3% down is $13,500, leaving a $436,500 loan with no upfront fee. Monthly MIP is $441,849 × 0.55% ÷ 12 ≈ $203; PMI is quoted by score — we use an illustrative 0.60% for the 760 buyer and 1.25% for the 660 buyer. Taxes and homeowners insurance excluded.
| FHA 3.5% down (either score) | Conventional 3% down, 760 score | Conventional 3% down, 660 score | |
|---|---|---|---|
| Loan amount | $441,849 (incl. financed UFMIP) | $436,500 | $436,500 |
| Principal & interest @ 6.5% | $2,793 | $2,759 | $2,759 |
| Monthly mortgage insurance | $203 (0.55% MIP) | $218 (0.60% PMI) | $455 (1.25% PMI) |
| Total P&I + MI | $2,995 | $2,977 | $3,214 |
| Verdict vs FHA | — | Conventional saves ~$18/mo, skips the $7,599 UFMIP, and the PMI cancels | FHA saves ~$218/mo — about $2,620 a year |
Two honest footnotes. First, we held the rate equal to isolate the mortgage insurance — in the real market, a 660-score conventional quote usually carries a higher rate than the 760 quote too, which widens FHA's advantage further. Second, the 760 buyer's edge is bigger than $18: no $7,599 upfront premium, and their $218 PMI disappears at 20% equity while the FHA buyer's $203 MIP runs for the life of the loan at this down payment.
When does FHA win — and when does conventional?
FHA usually wins when:
- Your score is in the mid-600s or below — flat MIP beats credit-priced PMI.
- Your score is 500–579 and you can put 10% down, or 580+ with 3.5% — conventional's 620 floor is out of reach.
- Your debt-to-income ratio is high — FHA approves more files above conventional's comfort zone.
- Your credit history is thin or recently repaired — FHA underwriting is built for it.
Conventional usually wins when:
- Your score is around 720 or higher — PMI gets cheap and there's no 1.75% upfront fee.
- You're putting 10–20%+ down — PMI shrinks or vanishes while FHA still charges MIP.
- You want the insurance to end on its own — PMI cancels at 80% LTV, automatically at 78%.
- The price is above $541,287 — past Clark County's FHA limit, conforming room runs to $832,750.
Valley West takeThe buyers who overpay are almost always in the 680–720 band — the zone where the winner isn't obvious and most people just take whichever loan gets suggested first. Consequently, that band is exactly where we price every file both ways. As a broker we also shop the PMI quote itself across insurers, which can move the conventional number more than a rate change would. And if FHA wins today, we set the exit at closing: the plan to refinance into conventional the moment equity and score make the MIP unnecessary.
Price your file both ways in ten minutes.
Specifically, a Las Vegas loan officer runs your actual score, down payment, and debts through FHA and conventional side by side — real numbers, not rules of thumb. No obligation.
Get your fast quoteThe exit plan: how to refinance out of FHA MIP
Choosing FHA at 3.5% down isn't choosing MIP forever — it's choosing it until you refinance. Because annual MIP at under 10% down runs for the life of the loan, the standard play is: buy with FHA while your score is mid-600s, spend two or three years building equity and credit, then refinance into a conventional loan at 80% LTV or below — no PMI, no MIP, done. Even landing between 80% and 95% LTV can work if your improved score prices PMI below the 0.55% MIP you're dropping. Conventional borrowers get a cheaper version of the same move: PMI removal by request at 80% LTV, no refinance required. The one number to respect: refinancing only pays if the all-in monthly savings clear the closing costs within your expected stay.
Not sure which side of the line you're on?
Send us the basics — score range, savings, target price — and we'll show you FHA vs conventional on your numbers, plus what a refinance exit would look like later.
Get your fast quoteFHA vs conventional FAQ
Is FHA or conventional better for a 620 credit score?
Usually FHA. Conventional is technically available at 620, but PMI and rate pricing at that score with a small down payment are expensive — FHA's flat-priced MIP typically produces the lower payment. However, price both to be sure.
What credit score do you need for FHA vs conventional?
FHA: 580 with 3.5% down (500–579 requires 10% down). Conventional: 620 minimum, with pricing that keeps improving in tiers up to about 780.
Can I switch from FHA to conventional later?
Yes — that's the standard exit. For example, refinance into conventional at 80% LTV or below and the MIP is gone with no PMI replacing it. As a result, many buyers start FHA and refinance out within a few years.
Does FHA mortgage insurance ever cancel on its own?
With less than 10% down, no — it runs for the life of the loan. With 10%+ down it drops after 11 years. On the other hand, conventional PMI cancels at 80% LTV and ends automatically at 78%.
What are the 2026 loan limits in Las Vegas?
$541,287 for a one-unit FHA loan in Clark County; $832,750 for the conforming baseline. Therefore, between those numbers, conventional is often the only low-down-payment option.
Is FHA always cheaper when my score is low?
Usually below roughly 680, but not always — PMI quotes vary by insurer and down payment, and seller credits can change the math. In short, price the identical file both ways.
The bottom line
FHA vs conventional isn't a loyalty question — it's arithmetic that changes as your credit score does. Mid-600s and below, FHA's flat mortgage insurance is usually the win. At 720+, conventional's cheap, cancellable PMI usually takes it. In between, the only honest answer is to price your exact file both ways — and whichever you start with, know your exit before you close.
Sources
- HUD Handbook 4000.1 — FHA credit, down payment, and MIP requirements: hud.gov
- HUD — FHA announces 2026 loan limits: hud.gov
- FHFA — Conforming loan limit values for 2026 ($832,750 baseline): fhfa.gov
- CFPB — What is private mortgage insurance?: consumerfinance.gov
Writing your own paycheck? See our self-employed mortgage guide for how lenders count your income on either program.
Across Valley West: Ready to price both sides for real? Our program-specific sites go deeper: FHAHomeLoans.services and ConventionalHomeLoans.services.
Keep reading
Last updated: July 19, 2026 — published with 2026 loan limits ($832,750 conforming / $541,287 Clark County FHA), current MIP pricing, and the 660-vs-760 worked example.
