FHA vs. Conventional Loan: Monthly Payment With Mortgage Insurance
October 29, 2026
FHA loans are insured by the Federal Housing Administration and allow lower down payments (3.5% with a credit score of 580 or higher) and more flexible credit standards. Conventional loans are not government-insured; with less than 20% down, they require private mortgage insurance (PMI), whose cost depends heavily on the credit score.
Consider a $300,000 home and an interest rate of 6.5% for both, to isolate the effect of insurance (in reality, rates differ by program and credit).
Skip the math and get your answer instantly:
Open the Mortgage Calculator →FHA Loan Example
Down payment 3.5% = $10,500, base loan $289,500. The upfront mortgage insurance premium (UFMIP) of 1.75% is $5,066, usually added to the loan: $294,566. Principal and interest at 6.5% for 30 years: $1,861.86. The annual MIP of 0.55% on the base loan is $1,592 per year, or $132.69 per month (the rate varies with the loan amount, term, and down payment). Total monthly: about $1,994.55, before taxes and homeowner's insurance. Cash needed: $10,500 plus closing costs.
| Item | FHA (3.5% down) | Conventional (5% down, PMI 0.8%) |
|---|---|---|
| Down payment | $10,500 | $15,000 |
| Loan amount | $294,566 (incl. 1.75% UFMIP) | $285,000 |
| Principal and interest | $1,861.86 | $1,801.39 |
| Monthly mortgage insurance | $132.69 | $190.00 |
| Total monthly (P&I + insurance) | $1,994.55 | $1,991.39 |
Conventional Loan Example
With 5% down ($15,000), the loan is $285,000. P&I at 6.5%: $1,801.39. PMI at 0.8% of the loan per year ($2,280) is $190 per month. Total: $1,991.39, almost identical to FHA in this example. With a higher credit score (760+), PMI might be 0.3% to 0.4% ($71 to $95 a month), making the conventional loan about $100 cheaper per month; with a score of 640, PMI could be 1.5% or more, making FHA better.
How Long Mortgage Insurance Lasts
PMI on a conventional loan can be canceled when the loan balance reaches 80% of the original home value (and it terminates automatically at 78%). FHA MIP lasts for the life of the loan if you put down less than 10%; with 10% or more down, it lasts 11 years. A common strategy is to refinance from FHA into a conventional loan when equity reaches 20%, which removes the mortgage insurance, if rates make sense.
Choosing
Get quotes from both for your credit score, down payment, and loan amount, and compare the APR and total monthly cost, plus the cost over the time you expect to keep the loan. FHA has loan limits and property standards; conventional has stricter credit requirements. This article is educational; rates and premiums change.
Frequently Asked Questions
What is the minimum down payment on an FHA loan?
3.5% with a credit score of 580 or higher.
What is UFMIP?
The upfront FHA mortgage insurance premium, 1.75% of the loan, often financed.
When can PMI be removed?
When the balance reaches 80% of the original value, and it ends automatically at 78%.
Does FHA mortgage insurance ever end?
Not with less than 10% down; with 10% or more it ends after 11 years.
Which loan is cheaper?
It depends on your credit score and down payment.