FHA vs Conventional Mortgage Rates: 2026 Comparison
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The FHA-vs-conventional decision used to be straightforward: FHA for low-credit, low-down-payment buyers; conventional for everyone else. In 2026 the line has blurred. The Fannie Mae LLPA grid penalizes sub-700 conventional borrowers heavily enough that FHA can be cheaper even at 720 FICO with 10% down. At the same time, the FHA’s permanent Mortgage Insurance Premium (MIP) is a real long-term cost that conventional PMI doesn’t have once you cross 78% LTV.
We pulled rate sheets and total-cost projections from 12 lenders, ran the math at six representative borrower profiles, and built the side-by-side comparison below. The right answer depends on your FICO, your down payment, and how long you plan to keep the loan — sometimes it’s the opposite of what you’d expect.
How We Ranked Each Program
We compared FHA and conventional pricing for a $400,000 loan at six borrower profiles spanning FICO 580–780 and down payments of 3.5%, 5%, 10%, and 20%. We computed the all-in monthly cost (P&I + MIP or PMI) and projected it forward to year 5, year 10, and year 30 to see when crossover points appear. Lender pricing reflects May 2026 rate sheets from Rocket, Wells Fargo, PennyMac, Better, Chase, Guaranteed Rate, AmeriSave, US Bank, NAF, BofA, Veterans United, and SoFi.
FHA vs Conventional Rate Comparison (May 2026)
| Borrower Profile | FHA APR | FHA + MIP Effective | Conventional APR | Conv + PMI Effective | Cheaper |
|---|---|---|---|---|---|
| 580 FICO, 3.5% down | 7.24% | 8.13% | n/a | n/a | FHA |
| 620 FICO, 5% down | 6.99% | 7.86% | 8.49% | 9.10% | FHA |
| 660 FICO, 5% down | 6.74% | 7.61% | 7.69% | 8.30% | FHA |
| 700 FICO, 10% down | 6.59% | 7.40% | 7.14% | 7.55% | FHA narrowly |
| 740 FICO, 10% down | 6.49% | 7.30% | 6.84% | 7.15% | Conventional |
| 760+ FICO, 20% down | 6.44% | 7.25% | 6.74% | 6.74% | Conventional |
Affiliate disclosure: Mortgage24U may earn a commission when you apply through links in this article. This never affects our rankings — every lender is reviewed on the same scoring rubric.
The Real Cost Difference Over Time
| Borrower Profile | 5-Yr FHA Cost | 5-Yr Conv Cost | 10-Yr FHA Cost | 10-Yr Conv Cost |
|---|---|---|---|---|
| 620 FICO, 5% down | $186,000 | $208,800 | $352,800 | $379,200 |
| 660 FICO, 5% down | $176,400 | $194,400 | $337,200 | $361,200 |
| 700 FICO, 10% down | $169,200 | $174,000 | $324,000 | $329,400 |
| 740 FICO, 10% down | $165,600 | $164,400 | $317,400 | $313,800 |
| 760+ FICO, 20% down | $145,440 | $135,360 | $274,800 | $258,720 |
How MIP and PMI Differ
This is the single biggest source of confusion. They look similar but behave differently.
FHA MIP (Mortgage Insurance Premium):
- 1.75% upfront (financed into the loan)
- 0.55% annual on most loans
- Permanent for the life of the loan if you put down less than 10%
- Can only be removed by refinancing into a conventional loan
Conventional PMI (Private Mortgage Insurance):
- No upfront premium on most products
- 0.30% to 1.50% annual depending on FICO and LTV
- Automatically drops at 78% LTV (by amortization)
- Can be cancelled at 80% LTV with a request and appraisal
The permanence of FHA MIP is the program’s biggest long-term tax. If you’ll keep the loan past year 8, conventional usually wins for any FICO above 720. If you’ll refinance or sell within 5 years, the upfront FHA cost matters less and the lower note rate dominates.
When FHA Wins
- FICO below 660. The conventional LLPA grid is brutal here; FHA pricing is flat across the 580–679 band.
- Down payment below 10%. FHA’s 3.5% minimum is hard to match; conventional 3% programs (HomeReady, Home Possible) have stricter income limits.
- Higher DTI (up to 50%). FHA’s manual underwriting tolerates DTIs that conventional won’t approve.
- Manufactured or multi-unit primary residences. FHA pricing on 2–4 units is materially better.
- Plan to refinance within 5 years. The MIP-permanence problem is mitigated.
When Conventional Wins
- FICO 740+. LLPAs flip in your favor.
- Down payment 20%+. PMI is skipped entirely; FHA MIP can’t be skipped.
- You’ll keep the loan 10+ years. PMI eventually drops; FHA MIP doesn’t.
- Investment property or second home. FHA is primary-residence only.
- Loan amount above local FHA cap. FHA limits in 2026 range from $498K to $1.149M depending on county.
Top FHA Lenders for 2026
| Rank | Lender | Best Use Case | FHA APR (660 FICO) |
|---|---|---|---|
| 1 | PennyMac | Class-leading FHA pricing | 6.69% |
| 2 | Rocket Mortgage | Best digital FHA experience | 6.74% |
| 3 | Wells Fargo | Strong FHA desk, sub-620 friendly | 6.74% |
| 4 | Guaranteed Rate | FHA streamline refi | 6.79% |
| 5 | New American Funding | Manual UW for compensating factors | 6.84% |
Top Conventional Lenders for 2026
| Rank | Lender | Best Use Case | Conv APR (740 FICO) |
|---|---|---|---|
| 1 | Better.com | No lender fees | 6.79% |
| 2 | Chase | Relationship pricing | 6.69% (Premier) |
| 3 | SoFi | High-FICO discount | 6.74% |
| 4 | AmeriSave | Paid-point shoppers | 6.74% (with 1pt) |
| 5 | Bank of America | Preferred Rewards | 6.74% (Preferred) |
1. PennyMac — Best Overall FHA
PennyMac’s FHA desk is one of the largest in the country, and it shows in pricing — consistently 5–15 bps below the next-best lender for 580–680 FICO borrowers.
Pros: Lowest FHA pricing, broad FHA appetite, FHA streamline expertise. Cons: Less polished digital onboarding.
2. Rocket Mortgage — Best Digital FHA
Rocket’s FHA workflow is the cleanest digital experience in the program. Approvals are fast, and the company has stayed competitive on pricing post-2024 reforms.
Pros: Best app, fast underwriting, large FHA volume. Cons: Lender fees push APR above note rate.
➡️ Check rates at Rocket Mortgage
3. Wells Fargo — Sub-620 Specialist
Wells Fargo continues to underwrite FHA down to 580 with strong compensating factors when many lenders pull back to 620.
Pros: Wide FHA credit appetite, branch network. Cons: Heavier documentation than fintech.
4. Better.com — Best No-Fee Conventional
Better’s flat-pricing, no-lender-fee model wins for prime conventional borrowers who’d otherwise pay $2,000–$4,000 in origination at retail banks.
Pros: No origination, online-only efficiency. Cons: Limited jumbo and government-loan menu.
5. Chase — Best Conventional Relationship
Chase Premier and Sapphire customers get the largest published rate discount in retail banking — up to 0.50% — which is enough to beat fintech pricing on conventional loans.
Pros: Largest relationship discount, strong jumbo, branch access. Cons: Slower workflow than fintech.
How to Decide Between FHA and Conventional
- Get quotes for both from the same lender on the same day. Apples-to-apples is the only fair comparison.
- Compare all-in monthly cost (P&I + MIP/PMI), not note rate alone. Especially below 700 FICO.
- Run your projected hold period. Five years or fewer favors FHA; ten years or more favors conventional once FICO clears 720.
- Check the FHA loan limit for your county. Above the cap, FHA isn’t an option.
- Plan your refinance exit. If FHA today, what FICO and equity will you have to refinance to conventional in year 4?
Recommended Offers
💡 Editor’s pick — best FHA: PennyMac — class-leading FHA pricing across the credit spectrum.
💡 Editor’s pick — best conventional with relationship: Chase — Premier discounts up to 0.50%.
💡 Editor’s pick — best no-fee conventional: Better.com — no lender fees, transparent pricing.
FAQ — FHA vs Conventional Mortgage Rates
Q: Are FHA rates lower than conventional rates in 2026? A: Often yes — for borrowers under 700 FICO. The note rate is lower, but you pay it back through MIP, so the all-in cost depends on hold period.
Q: Can I refinance from FHA to conventional? A: Yes, and many borrowers do once they reach 80% LTV and 660+ FICO. The refinance eliminates MIP and may also lower your rate.
Q: What’s the minimum credit score for FHA in 2026? A: Officially 500 with 10% down or 580 with 3.5% down. In practice, most lenders set their minimum at 580–620.
Q: How long do I have to pay FHA MIP? A: For the life of the loan if you put less than 10% down. With 10%+ down at origination, MIP drops after 11 years.
Q: Can I use an FHA loan for an investment property? A: No. FHA is for owner-occupied primary residences only, including 2–4 unit buildings if you live in one of them.
Q: Is conventional always cheaper than FHA at 760 FICO? A: Almost always, especially with 20%+ down. The PMI advantage (none required at 20% down) plus tighter LLPAs at high FICO win.
Related Reading on Mortgage24U
- Today’s Mortgage Rates (2026)
- Mortgage Rates by Credit Score 2026
- How to Get the Lowest Mortgage Rate in 2026
- FHA Loan Requirements 2026
- First-Time Home Buyer Loans 2026
Final Verdict
If your FICO is below 700 or your down payment is below 10%, start with FHA — and shop PennyMac first for pricing. If your FICO is 740+ with 10%+ down, conventional almost always wins long-term — push Chase (with relationship), Better.com (without), and AmeriSave (with paid points) for quotes. The middle band (700–739 FICO with 5–10% down) is genuinely close; pull both quotes from the same lender and pick on the all-in cost projected to your honest hold period.
This article is for informational purposes only and is not financial advice. Rates and lender terms are accurate as of publication and subject to change. Mortgage24U may receive compensation for some placements; rankings are independent.
By Mortgage24U Editorial · Updated May 9, 2026
- mortgage rates
- FHA loans
- 2026
- mortgage