Core Insights - The article provides a comparison between FHA loans and conventional loans, highlighting their differences in terms of eligibility, requirements, and overall costs. Group 1: Loan Types Overview - FHA loans are insured by the Federal Housing Administration and are designed to make homeownership accessible to first-time buyers and those with limited savings or credit challenges [2][3] - Conventional loans are typically issued by banks and can be purchased by Fannie Mae and Freddie Mac, with stricter eligibility requirements compared to FHA loans [4][3] Group 2: Eligibility Requirements - A minimum credit score of 620 is generally required for conventional loans, while FHA loans can be obtained with a credit score as low as 500 with a 10% down payment or 580 with a 3.5% down payment [6][5] - FHA lenders may allow a debt-to-income (DTI) ratio as high as 57%, while conventional lenders prefer a maximum DTI ratio of 36% to 43% [8][7] Group 3: Down Payment and Mortgage Insurance - FHA loans require a down payment of 3.5% for credit scores of 580 or higher, while conventional loans may require a minimum of 3% to 5% down [10][11] - FHA loans require mortgage insurance premiums (MIP) for the life of the loan, whereas conventional loans require private mortgage insurance (PMI) only if the down payment is less than 20% [14][13] Group 4: Loan Limits - As of 2025, the conforming loan limit for one-unit single-family homes is $806,500, with higher-cost areas at $1,209,750, while the FHA loan limit for a one-unit property in lower-cost areas is $524,225 [16][17] Group 5: Refinancing Options - Homeowners can refinance from an FHA loan to a conventional loan if they meet eligibility requirements, which may be beneficial to remove FHA mortgage insurance [18] - Refinancing from a conventional loan to an FHA loan is possible but may not be financially advantageous due to mandatory MIP [20][19] Group 6: Comparative Advantages - Conventional loans may be preferable for borrowers with good credit and the ability to make a larger down payment, as they can avoid PMI and secure lower rates [21][22] - FHA loans may be the only option for borrowers with lower credit scores, but they come with the downside of ongoing mortgage insurance [23][24]