FHA vs. conventional: when each wins
FHA wins on qualification: lower credit score floors (580 vs. 620+), higher allowable debt-to-income ratios, and gift funds covering 100% of down payment. If you're a first-time buyer with a 620 score and 5% saved, FHA is often your only realistic path.
Conventional wins on long-term cost: private mortgage insurance (PMI) cancels automatically at 80% LTV; FHA MIP does not, unless you put 10% or more down. At today's home prices that break-even point is roughly year 7–9. If you plan to stay in the home longer than that, a conventional loan at 5% down will typically be cheaper in total.
The rate gap narrows the comparison. FHA note rates in 2026 run about 0.25–0.50% below comparable conventional rates. On a $350,000 loan, that saves roughly $50–90/mo on P&I, which offsets a significant chunk of the MIP cost, especially in the early years.
UFMIP and annual MIP: the real cost of FHA insurance
FHA mortgage insurance has two pieces. The Upfront MIP (UFMIP) is 1.75% of the base loan, paid at closing or rolled into the note. On a $360,000 base loan that is $6,300, a meaningful number. When financed, it raises your note to $366,300 and you pay interest on that extra $6,300 for the full term.
The Annual MIP is divided into 12 monthly installments. The most common 2026 rate for a 30-year loan with less than 5% down is 0.55% annually. On a $360,000 loan that is $165/month. Over 30 years (if MIP is never cancelled) that totals roughly $59,400 in insurance premiums alone.
The MIP rate drops for 15-year loans (0.15–0.65% depending on LTV) and for loans with higher down payments. If you can stretch to 10% down, you not only lower the MIP rate slightly, you also lock in MIP cancellation at the 11-year mark, avoiding up to 19 extra years of monthly premiums.
The 580 credit score floor (and how lenders overlay it)
HUD's official minimum credit score for 3.5%-down FHA loans is 580. But lenders are allowed to set stricter standards, called "overlays", and most do. In practice, you'll find it hard to get an FHA loan below 620 at most banks and credit unions. A handful of lenders, including some non-bank mortgage companies, still work down to 580.
If your score is 580–619, shop widely: a mortgage broker who works with multiple wholesale lenders is often your best path. One lender's rejection is not an industry-wide no. Get your official tri-merge credit report and dispute any errors before applying; a single corrected item can move a score 20–30 points.
FHA county loan limits in 2026
FHA publishes a new loan limit table every November, effective January 1. For 2026, the single-family floor (baseline) is $541,288 and the ceiling (for high-cost metros) is $1,249,125. Between those extremes, each county has its own limit based on median home prices.
If your loan amount exceeds the limit, FHA will not insure it; you need a conventional or jumbo loan. This is most common in expensive coastal metros. Look up your county at the HUD website or use the field in this calculator to check whether your deal fits within the limit before you make an offer.
MIP cancellation and the conventional refinance exit
For borrowers who put less than 10% down (the majority of FHA buyers), MIP is permanent. The only way out is to refinance into a conventional loan. The break-even question is: when will you have 20% equity? That depends on your down payment, appreciation rate, and how aggressively you pay down the principal.
At 3.5% down with 3% annual appreciation, many borrowers cross the 80% LTV threshold somewhere in year 6–8. At that point, a refi into a conventional loan eliminates MIP and, if rates have held or fallen, can actually lower the total monthly payment.
The refinance math: assume $200/mo in MIP, $3,000 in closing costs. Break-even on the refi cost is 15 months. After that, every month is $200 ahead. Over the remaining loan life, the savings are substantial, often $25,000–40,000 on a median US home.
