# FHA vs conventional: which costs less over 5 and 10 years?

> FHA or conventional? We total the upfront premium, MIP, PMI and interest at 3.5%, 5% and 10% down over 5 and 10 years, and show where credit tips it.

URL: https://mail.mortgage-math-us.com/blog/fha-vs-conventional/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

At the same interest rate, a conventional loan with mid-range PMI costs about **$8,245 less** than FHA over 10 years on a $350,000 home with 3.5% down, because FHA adds a 1.75% upfront premium and annual MIP that never cancels below 10% down. FHA comes out ahead when your PMI quote would be more than about $70 a month per $100,000 borrowed — which can happen with lower credit scores — or when the FHA rate is roughly 0.24 of a percentage point lower than the conventional quote.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| FHA upfront mortgage insurance premium | 1.75% | [HUD Mortgagee Letter 2023-05](https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf) | Feb 22, 2023 |
| FHA annual MIP, under 5% down (30-year) | 0.55% | [HUD Mortgagee Letter 2023-05](https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf) | Feb 22, 2023 |
| FHA annual MIP, 5% or more down (30-year) | 0.5% | [HUD Mortgagee Letter 2023-05](https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf) | Feb 22, 2023 |
| Conventional PMI, low end (per $100,000 a month) | $30 per $100k a month | [Freddie Mac My Home](https://myhome.freddiemac.com/buying/breaking-down-pmi) | Oct 28, 2026 |
| Conventional PMI, high end (per $100,000 a month) | $70 per $100k a month | [Freddie Mac My Home](https://myhome.freddiemac.com/buying/breaking-down-pmi) | Oct 28, 2026 |
| PMI can be cancelled on request at | 80% | [CFPB](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/) | Oct 28, 2026 |

## Why the first payment is the wrong comparison

Most FHA-versus-conventional comparisons stop at the monthly payment. That misses two things that only show up over time: FHA’s 1.75% upfront premium is added to your balance and you pay interest on it for as long as you keep the loan, and FHA’s annual premium keeps running after conventional PMI has been cancelled.

So this post adds up everything each loan costs over five and ten years — interest, mortgage insurance and the upfront premium — on the same $350,000 home. The rules behind each loan are covered in our guides to [FHA loans](https://mail.mortgage-math-us.com/loan-types/fha-loans/) and [conventional loans](https://mail.mortgage-math-us.com/loan-types/conventional-loans/); here we only do the math.

The assumptions, so you can check them:

- **Rate:** both loans at today’s 30-year average of 7.24%. FHA quotes are often different; a section below shows what a lower FHA rate does.
- **FHA insurance:** 1.75% upfront, financed. Annual MIP of 0.55% when you put down less than 5% and 0.5% with 5% or more, held level for simplicity. With 10% or more down it stops after 11 years; otherwise it lasts for the life of the loan.
- **Conventional PMI:** Freddie Mac’s typical range of $30–$70 a month per $100,000 borrowed, cancelled when the original schedule reaches 80% of the purchase price and you ask your servicer to drop it.
- **Same down payment** on both loans, so the cash you bring is identical.

## Monthly payment at 3.5%, 5% and 10% down

*Principal, interest and mortgage insurance on a $350,000 home at 7.24% (PMI at the midpoint)*

| Down payment | FHA payment | FHA total | Conventional payment | Conventional total |
|---|---:|---:|---:|---:|
| 3.5% ($12,250) | $2,342 + $155 MIP | **$2,497** | $2,302 + $169 PMI | **$2,471** |
| 5% ($17,500) | $2,306 + $139 MIP | **$2,444** | $2,266 + $166 PMI | **$2,432** |
| 10% ($35,000) | $2,184 + $131 MIP | **$2,316** | $2,147 + $158 PMI | **$2,304** |

Taxes and insurance are the same on both loans, so they are left out here. FHA’s principal and interest is higher at every down payment because the loan includes the financed upfront premium of $5,911 at 3.5% down. Read more about how that premium works in the [UFMIP glossary entry](https://mail.mortgage-math-us.com/glossary/upfront-mortgage-insurance-premium/).

## Total cost over five and ten years

Total cost here means interest paid, plus mortgage insurance paid, plus the upfront premium you still owe when you sell or refinance. It is the money the loan costs you, not counting the principal you pay down.

*Total cost of borrowing on a $350,000 home, same rate on both loans*

| Down payment | Kept for | FHA | Conventional (PMI low – high) | Cheaper at PMI midpoint |
|---|---|---:|---:|---|
| 3.5% | 5 years | $136,370 | $125,167 – $133,273 | Conventional by $7,150 |
| 3.5% | 10 years | $258,418 | $242,067 – $258,279 | Conventional by $8,245 |
| 5% | 5 years | $133,419 | $123,221 – $131,201 | Conventional by $6,208 |
| 5% | 10 years | $252,739 | $238,304 – $254,264 | Conventional by $6,455 |
| 10% | 5 years | $126,397 | $116,736 – $124,296 | Conventional by $5,881 |
| 10% | 10 years | $239,437 | $224,155 – $237,133 | Conventional by $8,792 |

> **Worked example: 3.5% down, kept for 10 years**
>
> | | FHA | Conventional |
> |---|---:|---:|
> | Loan amount | $343,661 | $337,750 |
> | Interest over 10 years | $233,931 | $229,908 |
> | Mortgage insurance over 10 years | $18,576 | $20,265 |
> | Upfront premium still owed | $5,911 | $0 |
> | **Total cost** | **$258,418** | **$250,173** |
> 
> On the conventional loan, PMI is paid for 11 years and 8 months if the original schedule is your only path to 80% — longer than ten years at this down payment, so it runs for the whole period. FHA’s annual MIP of $155 a month would carry on for the life of the loan.

Over five years the gap at 3.5% down is $7,150; over ten it grows to $8,245. At 10% down, conventional PMI on the original schedule can be dropped after 8 years and 7 months — inside the ten-year window — while FHA’s annual premium runs for 11 years even at that down payment.

## Where your credit score tips the balance

Freddie Mac’s $30–$70 range is a typical spread, not a cap. PMI is priced mainly on your credit score and down payment, so a borrower with a lower score can be quoted more than the top of the range, while FHA charges every borrower the same premium for a given loan size, term and down payment.

That gives you one number to look for on a conventional Loan Estimate. At 3.5% down, held for ten years, conventional stays cheaper as long as PMI costs less than about **$70 a month per $100,000 borrowed**. That break-even sits right at the top of Freddie Mac’s typical range. At 5% down the break-even is about $66. If your quote is higher, FHA is likely the cheaper loan, before any rate difference.

> **Tip: Ask for the PMI figure in dollars**
>
> Your Loan Estimate shows mortgage insurance on page 1. Divide it by the loan amount in hundreds of thousands to compare it with the break-even above. The [PMI guide](https://mail.mortgage-math-us.com/buying/pmi/) explains how lenders price it and how to get it removed early.

Credit also changes the rate itself. Our [credit score guide](https://mail.mortgage-math-us.com/buying/credit-score/) covers the minimum scores for each loan and how lenders price lower scores.

## If the FHA rate is lower

Lenders price FHA and conventional loans separately, so the two quotes you get on the same day often carry different rates. The table treats that gap as an example assumption — it is not an offer — and reruns the 3.5% down, ten-year case against a conventional loan at today’s average with mid-range PMI.

*10-year cost at 3.5% down when the FHA rate is lower (example rates)*

| FHA rate | FHA 10-year cost | Cheaper loan |
|---|---:|---|
| Same rate (7.24%) | $258,418 | Conventional by $8,245 |
| 0.125 point lower (7.115%) | $254,081 | Conventional by $3,908 |
| 0.25 point lower (6.99%) | $249,749 | FHA by $424 |
| 0.5 point lower (6.74%) | $241,104 | FHA by $9,069 |

On these numbers, an FHA rate about **0.24 of a point** below the conventional rate erases conventional’s advantage. Compare the two Loan Estimates from the same day, because rates move daily.

## When debt-to-income decides it

Sometimes cost doesn’t matter because only one loan will approve you. Say you earn $115,000 a year with $650 a month of other debts and buy the $350,000 home with 3.5% down. Adding property tax at 0.89% and average insurance, the FHA loan gives a housing ratio of 30.3% and a debt-to-income ratio of 37.0%; the conventional loan, with PMI at the midpoint, gives a debt-to-income ratio of 36.8%.

The FHA file passes both of FHA’s manual-underwriting limits without compensating factors: 31% for housing and 43% in total. The conventional ratio is above Fannie Mae’s 36% manual limit and inside the 45% allowed with strong credit and reserves. Both programs’ automated systems can approve higher ratios — Fannie Mae’s Desktop Underwriter goes up to 50% — so this matters most when your file needs a manual review. Our post on [how lenders calculate debt-to-income](https://mail.mortgage-math-us.com/blog/how-lenders-calculate-debt-to-income/) shows which payments go into the ratio.

## The refinance exit from FHA

With less than 10% down, the usual way to stop paying MIP is to [refinance into a conventional loan](https://mail.mortgage-math-us.com/refinancing/refinance-to-remove-pmi/) once you have 20% equity. If the home’s value didn’t change at all, the 3.5%-down FHA loan reaches 80% of the purchase price after about 12 years and 4 months of scheduled payments — well past the ten-year mark used in the tables. Rising values or extra payments shorten that.

Refinancing has its own price: typically 3%–6% of the new loan. On a $280,000 refinance that is $8,400–$16,800, which takes 55–109 months of saved MIP to recover unless the new rate is also lower. Planning on a refinance to fix FHA’s cost is a bet on rates and prices, so judge FHA on the cost you would pay if you kept it.

## How to compare your own quotes

**How to compare FHA and conventional Loan Estimates**

1. **Request both on the same day** — Ask one or two lenders for an FHA and a conventional Loan Estimate with the same down payment and closing date, so rate moves don’t distort the comparison.
2. **Pull out four numbers** — The rate, the loan amount (FHA’s includes the upfront premium), the monthly mortgage insurance and any points.
3. **Check PMI against the break-even** — Convert the PMI to dollars per $100,000 a month and compare it with the figure in the credit section above.
4. **Pick a holding period** — Use five years if you may move or refinance soon, ten or more if you plan to stay.
5. **Total the cost** — Interest, mortgage insurance and upfront premium over that period; the [mortgage payment calculator](https://mail.mortgage-math-us.com/tools/mortgage-payment-calculator/?price=350000&down=3.5) gives the monthly figures and amortization.

[Open the mortgage payment calculator](https://mail.mortgage-math-us.com/tools/mortgage-payment-calculator/)

## Frequently asked questions

### Is FHA or conventional cheaper with 3.5% down?

At the same rate and mid-range PMI, conventional is cheaper over 10 years by about $8,245 on a $350,000 home in our example. FHA wins if your PMI quote is above roughly $70 a month per $100,000 borrowed, or if the FHA rate is around 0.24 of a point lower.

### Does FHA mortgage insurance ever go away?

Only if you start with a loan-to-value of 90% or less — 10% down or more — in which case annual MIP ends after 11 years. With less down it lasts for the life of the loan, and the usual way out is a refinance.

### When can I drop PMI on a conventional loan?

You can ask your servicer to cancel it once your balance is scheduled to reach 80% of the original value, and it ends automatically at 78% if you are current. In our 10%-down example that is about 8 years and 7 months on the original schedule.

### Why is the FHA loan amount higher than the price minus my down payment?

Because the 1.75% upfront premium is usually added to the loan. On $350,000 with 3.5% down that adds $5,911, which you repay with interest.

### Should I choose FHA if my credit score is low?

It deserves a close look. Conventional PMI and rates are priced on your score, while FHA’s premium is the same for every borrower at a given down payment. Get both quotes and check the PMI against the break-even figure in this post.

### Is a 5% down conventional loan better than 3.5% down FHA?

Usually on cost: the conventional loan has no upfront premium and its PMI can be cancelled. It does need $5,250 more cash on a $350,000 home, and lower scores pay more for PMI.

## Sources

- [Freddie Mac Primary Mortgage Market Survey](https://www.freddiemac.com/pmms) — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- [HUD Mortgagee Letter 2023-05](https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf) — FHA upfront mortgage insurance premium; FHA annual MIP, 30-year loan, more than 95% LTV; FHA annual MIP, 30-year loan, 95% LTV or less (Feb 22, 2023)
- [CFPB](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/) — Ask your servicer to cancel PMI at this share of original value; PMI ends automatically at this share of original value (Oct 28, 2026)
- [Freddie Mac My Home](https://myhome.freddiemac.com/buying/breaking-down-pmi) — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- [US Census Bureau, American Community Survey 2024 1-year](https://data.census.gov/table/ACSDT1Y2024.B25103?g=010XX00US) — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- [Freddie Mac Research](https://www.freddiemac.com/research/insight/homeowners-insurance-costs) — Average homeowners insurance premium per $1,000 of home value (2023 data)
- [HUD Mortgagee Letter 2026-11](https://www.hud.gov/sites/default/files/hudclips/documents/2026-11hsgml.pdf) — FHA manual underwriting debt-to-income ratio (no compensating factors); FHA manual underwriting housing ratio (no compensating factors) (Oct 8, 2026)
- [Fannie Mae Selling Guide B3-6-02](https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios) — Fannie Mae maximum DTI, manually underwritten loans; Fannie Mae maximum DTI, manual underwriting with strong credit and reserves; Fannie Mae maximum DTI, Desktop Underwriter loans (Apr 2, 2025)
- [Freddie Mac My Home](https://myhome.freddiemac.com/refinancing/costs-of-refinancing) — Typical refinance closing costs, low end (share of loan principal); Typical refinance closing costs, high end (share of loan principal) (Oct 28, 2026)
- [HUD Mortgagee Letter 2023-05: Reduction of FHA annual MIP](https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf)
- [CFPB: Understand the different kinds of loans available](https://www.consumerfinance.gov/owning-a-home/loan-options/)
- [CFPB: When can I remove private mortgage insurance (PMI)?](https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/)

_General information, not financial advice._