Discover the most cost-effective mortgage option for your home purchase with our FHA vs. Conventional Loan Calculator. Enter the following information and get estimates that could guide your decision-making process.
Mortgage
FHA vs. Conventional Loan Calculator
Updated: December 10, 2024
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FHA vs. Conventional Loan Calculator
Compare both FHA and conventional mortgage programs to get proper understanding of your situation
Basic Details
Some basic details about the property and loanEnter the property's fair market value, or the price you expect to pay for the home.
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Your down payment is the initial cash amount due from you that you pay at closing. It is expressed as a percentage of the purchase price or home value. The amount your lender may require as a down payment can vary dramatically, depending on the type of loan you have, the value of the home and your credit score. The default down payment percentage of 20% is the most common.
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The length of the loan repayment period, typically 30 or 15 years
Enter your best guess if you do not know your FICO credit score:
- Exceptional: 800 - 850
- Very Good: 740 - 799
- Good: 670 - 739
- Fair: 580 - 669
- Poor: 300 - 579
Interest Rate
Interest is the amount your lender charges for loaning you money. The interest is stated as a percentage of the total loan value. The default interest rate is based on today's rate for a 30-year fixed term loan, which is one of the most common types of mortgages.
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Calculation Results
| Financial Analysis | FHA | Conventional | Difference |
|---|---|---|---|
| Monthly Payment (First Year) | FHA$0 | Conventional$0 | Difference$0 |
| Upfront Costs | FHA$0 | Conventional$0 | Difference$0 |
| Total 30-Year Cost | FHA$0 | Conventional$0 | Difference$0 |
| Total 5-Year Cost | FHA$0 | Conventional$0 | Difference$0 |
| Monthly Mortgage Insurance (First Year) | FHA$0 | Conventional$0 | Difference$0 |
| Down Payment | FHA$0 | Conventional$0 | Difference$0 |
| Calculator results are rounded to the nearest whole dollar. | |||
How to Use the FHA vs. Conventional Loan Calculator
Home Price | Determines the baseline for your loan calculation, impacting the overall loan amount and the financing needed. |
Down Payment | Influences your loan-to-value ratio, which can affect loan approval, interest rates and whether mortgage insurance is required. |
Estimated Mortgage Payment | Affects your monthly payments and total interest over the life of the loan, helping you plan long-term financial commitments. |
Credit Score | Used to assess your creditworthiness, directly affecting your interest rates on both FHA and conventional loans. |
FHA Loan Rate | Essential for calculating the specific costs associated with an FHA loan, including your monthly payments and total loan cost. |
Conventional Loan Rate | Key for comparing costs against FHA loans, impacting your decision on the most economical loan option. |
Once you’ve put in all the required information, here’s what you’ll get:
Monthly Payment (For the First Year) | Shows your initial monthly mortgage expenses, helping you budget effectively and see which loan offers lower initial payments. |
Upfront Costs | Lists all initial fees and costs involved in securing the loan, including closing costs, to compare total initial expenditures for both loan types. |
Total 30-Year Cost | Provides the cumulative cost over the life of the loan, allowing for a long-term financial comparison between FHA and conventional options. |
Total 5-Year Cost | Focuses on the short-term financial impact, which is crucial for those considering refinancing or selling within a few years. |
Monthly Mortgage Insurance (First Year) | Indicates the cost of mortgage insurance required for each loan type, which can significantly affect your monthly budget. |
Down Payment | Displays the actual cash needed at closing, highlighting differences due to loan type requirements on down payment percentages. |
Based on your input, each line item will be highlighted to show which loan option is more affordable. The FHA vs. conventional loan calculator also provides a summary that indicates the more suitable loan type overall.
FHA vs. Conventional Loans: What’s the Difference?
FHA and conventional loans are popular choices for home financing because they offer unique benefits catering to different situations. Understanding the advantages and requirements of each can significantly influence the affordability and feasibility of your homebuying journey. Here’s a comparison chart that breaks these down into detail:
FHA Loans | Comparison Area | Conventional Loans |
|---|---|---|
Loans backed by the Federal Housing Authority with low down payments and can be easier to qualify for. | Definition | Privately insured loans that generally require higher credit scores. |
As low as 3.5% of the home price. | Down Payment | Typically as low as 3% to 20% of the home price. |
Minimum 500 with 10% down; 580 for 3.5% down. | Credit Score Requirement | Minimum score of 620. |
Required for the life of the loan if down payment is less than 10%. | Mortgage Insurance | Required until LTV ratio reaches below 80%. |
2024 FHA loan limits are $498,257 for low-cost areas and $1,149,825 for high-cost areas | Loan Limits (for one-unit properties) | 2024 loan limits are $766,550 for most areas and $1,149,825 for high-cost areas. |
FHA vs. Conventional Loan Rates
Comparing FHA and conventional loan rates can help you minimize costs over the duration of your mortgage. By understanding the nuances between these rates, you can strategically choose a loan that aligns with your financial goals. Explore the table below to see how figures vary between loan types and states.
Data filtered by:Results filtered by:
Select
State:Alabama
| 15-Year Fixed Rate FHA | 7.98% |
| 30-Year Fixed Rate FHA | 7.83% |
| Fixed15Year | 5.83% |
| Fixed30Year | 6.43% |
How the FHA vs. Conventional Loan Calculator Can Help
Using an FHA vs. conventional loan calculator can help you determine the most beneficial mortgage for your financial situation. Explore our scenarios next to see how different inputs can lead to various optimal mortgage solutions.
When an FHA Loan Makes Sense for First-Time Buyers
Sarah is a young professional ready to buy her first home. She has a stable income but only a “fair” credit score, which limits her mortgage options. While she’s saved for a down payment, she doesn’t have the funds for a full 20% of the home’s price. Sarah aims to find a home under $500,000 in a standard market and hopes to find a financing option that fits her current financial profile.
WHICH IS THE BETTER OPTION?
The FHA vs. conventional loan calculator shows that an FHA loan could be Sarah’s best choice. FHA loans are accessible for borrowers with fair credit and offer down payments as low as 3.5%, which aligns with her available funds. However, the calculator also highlights additional costs, like mortgage insurance premiums (MIP), which are required for FHA loans regardless of down payment size. This MIP can add to her monthly costs and will remain for the life of the loan unless she later refinances.
Despite the extra insurance costs, the FHA loan’s lower credit requirements and reduced upfront payment make homeownership more achievable for Sarah, balancing her financial limitations with her goal of buying her first home.
When a Conventional Loan Is the Smart Choice
Meet Daniel, a senior software engineer in Seattle with a steady income and strong financial profile. With a credit score in the high 700s, Daniel has maintained an excellent payment history. He keeps his monthly debt comfortably below 40% of his income. After years of saving, he’s ready to put down at least 20% on a home priced around $650,000, ensuring he avoids additional mortgage insurance.
WHICH IS THE BETTER OPTION?
Using the FHA vs. conventional loan calculator, Daniel sees that a conventional loan aligns best with his financial strengths. His high credit score qualifies him for competitive interest rates. At the same time, his 20% down payment waives the need for private mortgage insurance (PMI), a cost he’d incur with an FHA loan. The calculator’s breakdown also shows that a conventional loan’s terms and lower long-term costs suit his high credit profile and substantial equity position.
Daniel leverages his solid credit history and savings to minimize extra costs and secure favorable terms by choosing a conventional loan, making it the most cost-effective choice for his home financing.
Navigating Mortgage Options: Beyond Conventional and FHA Loans
Laura, a retired Navy officer living in Rhode Island, is eager to buy a home close to family. Having built her career and retirement savings, she’s financially secure but prefers to avoid a large down payment. As a veteran, Laura knows she may qualify for a VA home loan, a mortgage program offered by the Department of Veterans Affairs that’s specifically designed to support veterans with affordable home financing.
WHICH IS THE BETTER OPTION?
fter exploring her options using the FHA vs. conventional loan calculator, Laura realizes that while both loan types have their advantages, neither matches the unique benefits of a VA loan for veterans like herself. Unlike FHA and conventional loans, a VA home loan requires no down payment and waives private mortgage insurance, reducing her upfront and ongoing costs.
Given her veteran status, Laura also benefits from more lenient credit requirements and added protections against foreclosure, making the VA loan affordable and financially secure. For Laura, the VA loan offers the ideal path to homeownership, allowing her to maximize her veteran benefits while avoiding high out-of-pocket costs.
FAQ: FHA vs. Conventional Loans
What are the main differences between FHA and conventional loans?
FHA loans are government-backed with more lenient credit and down payment requirements, often suited for first-time buyers. Conventional loans are privately backed, typically requiring higher credit scores and larger down payments.
Is it easier to qualify for an FHA loan than a conventional loan?
Yes, FHA loans have lower credit and down payment requirements, making them easier to qualify for than conventional loans, which generally require a higher credit score and financial stability.
How does mortgage insurance differ between FHA and conventional loans?
FHA loans require mortgage insurance (MIP) for the life of the loan if the down payment is under 10%. Conventional loans require private mortgage insurance (PMI) only if the down payment is below 20%. PMI can be removed once you reach 22% equity.
Can I switch from an FHA loan to a conventional loan in the future?
Yes, you can refinance from an FHA loan to a conventional loan, often to eliminate mortgage insurance once you have enough home equity and a qualifying credit score.
Are there specific benefits of a conventional loan for high-credit borrowers?
Yes, high-credit borrowers may qualify for lower interest rates on conventional loans, avoid PMI with a 20% down payment and benefit from more flexible loan terms than FHA loans.
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About Zachary Romeo, CBCA
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.
Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
sources
- Federal Housing Finance Authority. "FHFA Announces Conforming Loan Limit Values for 2024." Accessed December 10, 2024.
- U.S. Department of Housing and Urban Development. "FHA Announces 2024 Loan Limits, Empowering Homebuyers Amidst Rising Home Prices." Accessed December 10, 2024.