This article is for you if you’re looking to buy your first home but are undecided on a Federal Housing Administration (FHA) loan or conventional loan. While both loans are standard choices for a low down payment, some differences make one better than the other.

Here are the main differences between the two so you can decide which makes better sense in your situation:

FHA Loan Advantages

  • FHA loans are based on the borrower’s ability to repay, not their credit score. This enables borrowers with lower credit scores to get a mortgage.
  • FHA loan rates are typically lower than conventional loan rates.
  • Borrowers with a low down payment of about 3.5 percent or minimal credit scores are often eligible for an FHA loan.
  • FHA loan limits are generally lower than conventional loan limits so that first-time buyers can save money on loan costs.
  • FHA loans usually require a minimum credit score of 580 to qualify.

Conventional Loan Advantages

  • Conventional loans are available with a minimum down payment of 5 percent or 10 percent, and can be a better option for borrowers with less than 3.5 percent to put down.
  • Borrowers with a minimum credit score of 620 are usually eligible for a conventional loan.
  • Conventional loan rates are frequently lower than FHA loan rates.
  • There is usually no limit on the amount of a conventional loan. This can often be a better option for borrowers who want to buy a more expensive home.

Which Is the Better Loan?

Ultimately, homeowners need to decide whether the benefits of an FHA loan are the best choice for their situation. If you have experienced a recent credit score drop, you may have the option to get an FHA loan.

If you have a satisfactory minimum credit score, a conventional loan may be a better option if you want to buy a more expensive home and put a higher minimum down payment.

Some other factors that should be considered when deciding between an FHA loan and a conventional loan include:

  • Potential for the loan to be purchased down the road. This can be essential for some customers, especially if the loan is for an investment property.
  • Minimum down payment for each type of loan. This is a factor for customers with low scores who need to put down more than 3.5 percent.
  • Each loan type charges interest rates. This can be a significant consideration for some customers, especially if the difference between the two types of loans is slight.
  • Ongoing costs for each loan type. While these costs are usually small, it may make a difference when you compare the price of a conventional loan with the cost of an FHA loan.


FHA loans are a decent option for specific borrowers. These loans provide a low down payment option and require a smaller monthly payment. However, they are not the best choice for everyone.

For example, if you have a high credit score and a good history of repayment on loans, you might find that a conventional loan would be a better option. Before deciding which type of loan to use, you should compare the benefits and costs of each option to determine which is the better choice for your situation.

Total Lending Concepts is your hometown mortgage lender, offering home loans to fit every situation. Whether you are a first-time home buyer searching for your first home or ready to buy that dream home you’ve had your eye on, we’ve got you covered! Our wide variety of loan options includes conventional, VA, USDA, FHA, and other options to fit your needs. If you need a home loan in Colorado Springs, call us at 877-266-4138 to inquire today!