FHA vs Conventional Mortgage Calculator
Compare the true monthly cost of an FHA loan against a conventional mortgage, accounting for MIP, PMI, and interest rate differences. Use this before choosing a loan type to find which option saves money over time.
About this calculator
FHA loans require a minimum 3.5% down payment but carry a mandatory annual mortgage insurance premium (MIP) of 0.85% of the loan balance, regardless of equity. The FHA monthly payment is: M_FHA = [P_FHA × (r_FHA(1+r_FHA)³⁶⁰) / ((1+r_FHA)³⁶⁰ − 1)] + (P_FHA × 0.0085 / 12). Conventional loans require PMI only when the down payment is below 20%, at a rate of ~0.30% for credit scores ≥ 740 or ~0.50% otherwise: M_Conv = [P_Conv × (r_Conv(1+r_Conv)³⁶⁰) / ((1+r_Conv)³⁶⁰ − 1)] + PMI. The calculator outputs the difference (M_FHA − M_Conv), so a positive number means conventional is cheaper monthly. Critically, FHA MIP lasts the full loan term on loans with less than 10% down, while conventional PMI cancels automatically at 80% LTV.
How to use
Home price: $350,000. FHA: 3.5% down ($12,250), loan = $337,750, rate = 6.75%, MIP = 0.85%. Monthly PI = $337,750 × [0.005625 × (1.005625)³⁶⁰] / [(1.005625)³⁶⁰ − 1] ≈ $2,190. MIP = $337,750 × 0.0085 / 12 ≈ $239. Total FHA = $2,429. Conventional: 5% down ($17,500), loan = $332,500, rate = 7.00%, PMI = 0.50% (score < 740). PI ≈ $2,213. PMI = $332,500 × 0.005 / 12 ≈ $138. Total Conventional = $2,351. Difference = $2,429 − $2,351 = $78/month in favor of conventional, despite the higher rate.
Frequently asked questions
When does an FHA loan cost more than a conventional mortgage over the life of the loan?
FHA loans tend to cost more over the full term primarily because the 0.85% annual MIP never cancels on loans with less than 10% down (originated after June 2013), whereas conventional PMI disappears once you reach 80% LTV. Even if the FHA rate is slightly lower, the perpetual MIP often makes it the more expensive option for borrowers who stay in the home long-term. Once a conventional borrower's PMI drops off, their monthly payment falls significantly while the FHA borrower continues paying insurance indefinitely. This calculator's monthly difference multiplied by 360 gives a rough lifetime cost comparison.
What credit score do I need to get a conventional loan instead of an FHA loan?
Most conventional lenders require a minimum credit score of 620–640, while FHA loans are accessible with scores as low as 580 (or even 500 with a 10% down payment). However, the real crossover point is around 680–700: below that, conventional PMI rates rise sharply, often making FHA the cheaper option despite the MIP. Above 740, conventional loans typically offer lower combined costs because PMI rates drop to around 0.30% and eventually cancel. This calculator lets you test different credit score tiers to see exactly where the break-even lies for your specific home price and down payment.
How does the down payment amount affect whether FHA or conventional is the better choice?
At very low down payments (3–3.5%), FHA and conventional compete closely, but FHA's guaranteed MIP often loses out over time once conventional PMI cancels. At 10% down on an FHA loan, MIP still applies for 11 years — better, but still costly. At 20% down, a conventional loan has no PMI at all, making it clearly superior in almost every scenario. The sweet spot where conventional first becomes cheaper on a monthly basis is typically around an 8–10% down payment, depending on credit score and rates. Running both scenarios in this calculator with your actual numbers will show exactly when one loan type edges out the other.