Compare FHA and conventional mortgage:

Loans guaranteed by the Federal Housing Administration, or FHA loans, aim to make buying homes more affordable for low- to middle-income families, with relaxed lending standards, down payments as low as 3.5% and competitive rates.
Two other loan programs backed by the federal government have similar aims: VA loans are guaranteed by the U.S Department of Veterans Affairs and are available to active military and veterans only. And USDA loans are backed by the U.S. Department of Agriculture and are geared toward buyers of rural properties.

Conventional mortgages are offered by many lenders that also offer FHA, VA and USDA loans. Lenders view conventional loans as riskier because they’re not guaranteed by the government if a buyer defaults, so these mortgages can have tougher requirements and higher rates.

Conventional mortgage borrowers typically make larger down payments than FHA borrowers, and they tend to have a more secure financial standing and are less likely to default. A larger down payment means lower monthly payments. Plus, with the ever-increasing mortgage insurance premiums on FHA loans, payments for conventional loans that don’t require private mortgage insurance can be much more manageable in comparison.

In addition, with a conventional loan, you can cancel your mortgage insurance when the principal loan balance drops to 78% of the home’s value. FHA loans charge mortgage insurance premiums for the life of the loan.

Conventional Loan

Introduction