FHA Loan Calculator

FHA loans are designed for two types of buyers: those with limited savings (minimum 3.5% down versus the 5–20% typically required for conventional loans) and those with imperfect credit (FHA accepts scores as low as 580 for the 3.5% down option, while conventional loans typically require 620 minimum and charge significantly more for scores below 700). For buyers with credit scores in the 580–680 range and down payments under 10%, FHA often provides lower mortgage insurance costs than the risk-based PMI pricing that conventional lenders charge.

First-time buyers who have saved only $15,000–$20,000 frequently find FHA is their only path to homeownership in most markets. A $300,000 home with 3.5% FHA down requires $10,500 in down payment plus closing costs, totaling roughly $18,000–$22,000 out of pocket. The same home with 5% conventional down requires $15,000 down plus closing costs — but conventional lenders may require 620+ credit and will charge high PMI for scores below 700. VA loans (for veterans) and USDA loans (for rural areas) are the only programs that outperform FHA on cost when the borrower qualifies.

The most important FHA disadvantage is often glossed over in the excitement of getting approved: with less than 10% down, FHA mortgage insurance premiums last the entire life of the 30-year loan. There is no automatic cancellation when you reach 20% equity, unlike conventional PMI. This means you pay the 0.55% annual MIP (roughly $133/month on a $290,000 loan) for the full 30 years — adding approximately $47,000 to your total housing cost over the life of the loan.

Conventional PMI automatically cancels under the Homeowners Protection Act when the loan balance reaches 78% of the original purchase price (or you can request cancellation at 80%). For a buyer who puts 3–5% down on a conventional loan, PMI typically lasts 7–10 years before disappearing. The FHA MIP lasts 30 years for most borrowers. This is why refinancing out of an FHA loan into a conventional loan becomes the right move for most borrowers once they have built 20% equity. The monthly savings from eliminating MIP — often $100–$200/month — typically justify the refinancing costs within 2–3 years. Set a reminder to evaluate your equity position every 2 years after taking an FHA loan.

For buyers with credit scores above 700 and down payments of 5% or more, conventional loans frequently cost less over time despite not requiring as small a down payment as FHA. This is because conventional PMI rates for strong-credit borrowers are lower than FHA's flat 0.55% MIP, and conventional PMI cancels when equity reaches 20%. The total mortgage insurance paid over the loan's life can be $15,000–$30,000 less with a conventional loan for the right borrower profile.

The comparison hinges on three variables: credit score, down payment, and planned ownership duration. Buyers who plan to sell or refinance within 5–7 years often find the FHA advantage on rate and down payment requirement outweighs the MIP disadvantage over that shorter timeline. Buyers planning to stay 15+ years and likely to build equity face a dramatically higher total cost with FHA MIP lasting 30 years versus 7–10 years of conventional PMI. Use the FHA vs. Conventional comparison in this calculator to model your specific credit score, down payment, and hold period. The break-even calculation is the most important number in the analysis — it tells you exactly when the conventional loan starts costing less in total, even with its higher initial PMI rates for lower credit scores.