FHA vs VA vs Conventional Loans: Which Mortgage Is Right for You?
FHA, VA, and conventional loans are the three most common mortgage options for homebuyers. They can look similar on the surface, but the rules, costs, and long-term tradeoffs are very different. In this guide, we’ll compare them clearly so you can choose the loan that fits your credit, down payment, and monthly budget.
This article is part of our Mortgage Types & Features section, where we explain different loan options and how they affect your monthly payment. If you want to estimate a full monthly payment with taxes and insurance, start with our mortgage payment calculator.
The Three Main Mortgage Types: FHA, VA, and Conventional
Most buyers will choose between FHA loans, VA loans, or conventional loans. The “best” option depends on your eligibility, credit profile, down payment, and whether mortgage insurance applies.
- FHA loans are government-insured mortgages designed to help borrowers qualify with smaller down payments or moderate credit.
- VA loans are for eligible service members, veterans, and certain surviving spouses and often come with exceptional benefits.
- Conventional loans are private-market mortgages and can offer the lowest long-term cost for well-qualified borrowers.
If you want to compare monthly payments across scenarios, use our loan comparison calculator.
FHA Loans Explained
FHA loans are insured by the Federal Housing Administration. They’re commonly used by first-time homebuyers and borrowers who want a lower down payment or more flexible credit guidelines than a conventional loan may allow.
Why borrowers choose FHA
- Lower down payment options compared to many conventional programs
- More forgiving credit standards for some borrowers
- Competitive rates for moderate-credit profiles
- Allows higher debt-to-income ratios in many cases
FHA mortgage insurance (MIP)
The main tradeoff with FHA is mortgage insurance. FHA loans typically include an upfront mortgage insurance premium and an annual premium paid monthly. Depending on your down payment and loan terms, FHA mortgage insurance may remain for the life of the loan.
That’s why many homeowners use FHA to buy, then refinance into a conventional loan later once credit and equity improve. You can model refinance scenarios using our refinance calculator and check timing with refinance breakeven.
VA Loans Explained
VA loans are backed by the U.S. Department of Veterans Affairs. If you’re eligible, a VA loan can be one of the most cost-effective ways to finance a home because it often eliminates monthly mortgage insurance.
VA loan advantages
- No required down payment in many cases
- No monthly mortgage insurance
- Competitive interest rates
- Flexible underwriting guidelines for many borrowers
VA funding fee (instead of mortgage insurance)
VA loans may include a one-time VA funding fee. The amount depends on factors like first-time use, down payment, and loan type. Some borrowers (including many disabled veterans) may be exempt.
Because VA loans typically avoid monthly insurance, they often produce lower total monthly payments than FHA or conventional loans with low down payments.
Conventional Loans Explained
Conventional loans are not government-insured. They’re offered by private lenders and typically reward stronger credit and larger down payments with better pricing and lower long-term costs.
Why borrowers choose conventional
- Can offer the lowest total cost for well-qualified borrowers
- Mortgage insurance may be removable
- Flexible term options and product variations
- Strong fit for borrowers with good credit and stable income
PMI: Conventional mortgage insurance
If your down payment is under 20%, conventional loans often require private mortgage insurance (PMI). Unlike FHA mortgage insurance, PMI can often be removed once you reach key loan-to-value thresholds.
You can estimate PMI impact using our PMI calculator and your current equity using our LTV calculator.
FHA vs VA vs Conventional: The Practical Differences That Matter
When comparing mortgage types, focus on total monthly cost and long-term interest-not just the advertised interest rate. These are the differences that typically matter most:
- Eligibility: VA is restricted to eligible borrowers. FHA and conventional are more broadly available.
- Down payment flexibility: VA often requires no down payment. FHA can be low down. Conventional varies by program and credit.
- Mortgage insurance: FHA includes MIP, conventional may include PMI, and VA generally has no monthly insurance.
- Long-term cost: Conventional may win long-term if PMI falls off and the rate is strong.
Want to see how a different loan term changes payments and total interest? Visit 15 vs 30 mortgage calculator or compare common terms like 30-year mortgage and 15-year mortgage.
How to Choose the Right Mortgage Loan
The “best” loan is the one that fits your finances and timeline. Here’s a simple way to decide.
- Check VA eligibility first if you have military service. If eligible, compare VA against the other options.
- Evaluate down payment and cash reserves. A higher down payment can lower PMI or eliminate it in conventional loans.
- Compare total monthly cost. Include taxes, insurance, HOA, and mortgage insurance where applicable.
- Think about how long you’ll keep the loan. Shorter timelines may favor lower upfront costs; longer timelines favor lower long-term interest.
- Confirm affordability. Start with income and debts, then work toward purchase price and loan structure.
If you’re still deciding your budget, start with mortgage affordability calculator and DTI calculator.
FHA vs VA vs Conventional Loan FAQs
Is FHA or conventional better for first-time homebuyers?
FHA can be easier to qualify for with limited credit history or a smaller down payment. Conventional can be less expensive over time if your credit is strong and you can remove PMI.
Do VA loans require mortgage insurance?
VA loans generally do not require monthly mortgage insurance. That’s a major reason VA loans can have lower monthly payments than FHA or low-down-payment conventional loans.
Can I refinance from FHA into conventional to remove MIP?
Yes. Many homeowners refinance from FHA to conventional once they build equity and improve credit, which can remove FHA mortgage insurance and reduce total monthly cost.
Which loan usually has the lowest monthly payment?
VA loans often produce the lowest monthly payment because they typically avoid monthly mortgage insurance. Conventional loans can be very competitive for strong credit profiles, especially with enough down payment to avoid PMI.
How can I estimate my full payment for each loan type?
Use our mortgage payment calculator to estimate a complete payment (PITI, plus PMI/HOA when needed). Then compare loan scenarios using loan comparison.
Ready to Compare FHA, VA, and Conventional Loans?
Start by estimating your monthly payment and then compare scenarios side by side. Small differences in insurance and fees can have a big impact over time.