FHA vs Conventional vs VA Loans — Comparing Mortgage Programs for Every Buyer in 2026

Conventional loans are not backed by a government agency — they conform to guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy mortgages from lenders. In 2026, the conforming loan limit is $806,500 for most US counties, and higher in designated high-cost areas.

Conventional loans require a minimum down payment of just 3% for first-time buyers (Fannie Mae's HomeReady and Freddie Mac's Home Possible programs) or 5% for repeat buyers. However, anything below 20% down triggers private mortgage insurance (PMI), which adds 0.5–1.5% of the loan amount annually to your payment. On a $320,000 loan, PMI could cost $133–$400 per month.

The major advantage of conventional loans is that PMI is cancelable. Once your equity reaches 20% (through payments, appreciation, or both), you can request PMI removal. At 22% equity, it must be removed automatically. This contrasts sharply with FHA loans, where mortgage insurance persists for the life of the loan.

Credit requirements are stricter for conventional loans: most lenders require a 620 minimum score, and you need 740+ for the best rates. Conventional loans also tend to have slightly lower total costs than FHA loans for borrowers who qualify, especially those with 10% or more to put down.

FHA loans are insured by the Federal Housing Administration and designed to help borrowers who might not qualify for conventional financing. They are particularly popular with first-time buyers, those with limited savings, and borrowers recovering from credit setbacks.

The headline benefit is accessibility: FHA loans require only 3.5% down with a credit score of 580 or above, or 10% down with scores between 500 and 579. On a $400,000 home, the minimum FHA down payment is $14,000 — far less than the $80,000 needed for 20% conventional.

However, FHA loans come with mandatory mortgage insurance premiums (MIP) that significantly increase the total cost. There is an upfront MIP of 1.75% of the loan amount ($5,600 on a $320,000 loan, usually rolled into the balance) plus an annual MIP of 0.55% ($1,760/year or $147/month) that lasts the entire life of the loan for borrowers who put less than 10% down. For those putting 10%+ down, MIP drops off after 11 years.

FHA loans also have lower loan limits than conventional loans in many areas, and the property must meet FHA minimum property standards — a more stringent inspection requirement that can complicate purchases of older homes or fixer-uppers.

VA loans, guaranteed by the Department of Veterans Affairs, offer benefits that no other mortgage program can match. Available to eligible veterans, active-duty service members, National Guard and Reserve members, and surviving spouses, VA loans are widely considered the best mortgage product available.

The marquee benefits: zero down payment required, no private mortgage insurance, and competitive interest rates that are often 0.25–0.5 percentage points below conventional rates. On a $400,000 home, a VA loan lets you finance the entire purchase with no money down and no monthly insurance premium — a potential savings of hundreds of dollars per month compared to FHA or low-down-payment conventional options.

VA loans do require a one-time funding fee ranging from 1.25% to 3.3% of the loan amount, depending on your down payment and whether it is your first VA loan. For a first-time VA borrower putting nothing down, the fee is 2.15% ($8,600 on a $400,000 loan). This fee can be rolled into the loan balance. Veterans with service-connected disabilities are exempt from the funding fee entirely.

There is no maximum VA loan amount for borrowers with full entitlement, and credit score requirements are flexible — many VA lenders approve scores as low as 580–620. VA loans also include protections like limits on closing costs that sellers or lenders can charge, and they offer streamline refinance options (IRRRL) for future rate reductions with minimal documentation.