Most first-time buyers end up choosing between an FHA loan and a conventional loan. Both can get you into a home with a small down payment. The differences show up in credit requirements, mortgage insurance, and what the loan costs over time.
Down payment
- FHA: as little as 3.5% down with a credit score of 580 or higher.
- Conventional: as little as 3% down for qualified first-time buyers, though 5% is more common.
On a $250,000 home, that's $8,750 for FHA versus $7,500 to $12,500 for conventional. Both allow gift funds from family and both can be paired with Arkansas down payment assistance.
Credit
FHA is the more forgiving program. Lenders regularly approve FHA loans at 580 and above, and a thin credit file or a past bankruptcy doesn't automatically disqualify you. Conventional loans generally start at 620, and the rate you're offered depends heavily on your score. Above about 740, conventional pricing is hard to beat.
Mortgage insurance, the real difference
This is where the two programs part ways.
An FHA loan charges an upfront mortgage insurance premium (usually rolled into the loan) plus a monthly premium. On most FHA loans today, the monthly premium stays for the life of the loan. The only way to remove it is to refinance.
A conventional loan requires private mortgage insurance only when you put down less than 20%, and you can request to cancel it once you reach 80% loan-to-value. It goes away automatically at 78%. For buyers with strong credit, PMI is also often cheaper than FHA insurance.
Property rules
FHA appraisals include minimum property standards, so a home with peeling paint, a damaged roof, or safety issues may need repairs before closing. Conventional appraisals are more flexible. If you're buying a fixer-upper, that matters.
How we decide with you
We don't guess. We price both options across our lender network and show you the monthly payment, the mortgage insurance cost, and the five-year total side by side. Sometimes the answer is FHA now and a conventional refinance later. Sometimes it's conventional from day one.
Compare the programs on our loan programs page, or get a quick quote and we'll run both for you.
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