FHA or Conventional — Which One Actually Saves You More Money?
FHA has a lower interest rate. But that's not the whole story. Here's what the real numbers look like on a $400,000 loan.
Real numbers — $400,000 loan
FHA upfront fee added to your balance
$7,000
Day one — before you make a payment
FHA mortgage insurance duration
30 years
Never cancels with less than 10% down
Conventional upfront fee
$0
No equivalent charge
Conventional PMI duration
Temporary
Cancels at 20% equity
The hidden cost
FHA's Lower Rate Isn't Free
FHA charges a 1.75% upfront mortgage insurance premium added directly to your loan balance at closing. On a $400,000 loan that's $7,000 more you owe from day one. The lower rate? You're paying for it — it's just financed instead of paid out of pocket.
The long-term cost
FHA Mortgage Insurance Never Goes Away
With less than 10% down, FHA mortgage insurance is permanent for the life of the loan. Conventional PMI cancels automatically when you reach 20% equity. Even if FHA has a lower payment today, conventional can end up cheaper over time once PMI drops off.
The bottom line: FHA makes sense for buyers with lower credit scores or who can't qualify for conventional. But if your credit is solid, conventional is frequently the better long-term deal — and most buyers never run both scenarios before signing.
I'll run FHA vs conventional side by side for your exact situation
Show you the real total cost of each including mortgage insurance
Top 1% loan officer licensed in 14 states. I run both scenarios for every borrower so you can make the decision that actually makes sense for your situation — not the one that's easiest for your lender.
Nate Moghadam, NMLS #906770 | Fairway Independent Mortgage Corporation, NMLS #2289 | Equal Housing Lender
Licensed in CA, CO, FL, ME, MD, MA, NH, NJ, NC, PA, RI, TN, TX, VA
This content is for informational purposes only and does not constitute financial advice. FHA vs conventional suitability depends on individual credit, income, and financial circumstances. Contact a licensed loan officer to discuss your specific situation. Fairway Independent Mortgage Corporation Disclosures