From the RatesQ team · Sample question

FHA vs Conventional for a first-time buyer with 10% down?

This educational scenario and its sample explanations are not posts from real users.

I have 10% down and a 685 credit score. My lender quoted me both an FHA loan and a conventional loan. The FHA rate is 0.25% lower but has MIP. The conventional has a higher rate but no MIP eventually. Which makes more sense?

Quick Summary

  1. FHA and conventional loans use different mortgage-insurance structures.
  2. Include upfront premiums, monthly insurance and their duration in a comparison.
  3. Compare the total cost of the actual offers over the same holding period.

Sample explanations

From the RatesQ team

Key FHA detail: with 10% down, FHA MIP now lasts 11 years (used to be for life). With less than 10% down, it's for the full 30 years. So at 10% down, FHA MIP isn't permanent. But you also pay the 1.75% upfront MIP which gets rolled in. The math really comes down to running the numbers on your specific loan amounts.

From the RatesQ team

This is very scenario-specific. At 685 credit with 10% down, conventional PMI will be in the 0.6-0.8% annual range. FHA monthly MIP is 0.55% for most loan amounts (2024+ rates). Run the comparison: FHA PITI+MIP vs conventional PITI+PMI for year 1 through year 11 (when FHA MIP drops off) and year 1 through loan payoff. Also remember the FHA UFMIP ($3,500 on a $200k loan) adds to the loan balance. At 685 score, conventional is often competitive with FHA and gives you more flexibility for removal. Get quotes for both and compare the actual Loan Estimates side by side.

From the RatesQ team

I was in this exact situation at 688 credit. Went conventional. PMI dropped off after about 4 years when values rose and I hit 80% LTV. Felt better than paying MIP for 11 years.