What's the difference between an FHA loan and a conventional loan?
The two biggest differences are the entry point and the mortgage insurance. FHA allows a down payment as low as 3.5% and credit scores from 580, making it more accessible for buyers with limited savings or a still-building credit history. Conventional loans can go as low as 3% down but generally want credit around 620 or higher for the best terms. Mortgage insurance is where they diverge most: FHA always requires MIP (upfront and annual, for the life of most loans), while conventional PMI — required only if you put down less than 20% — can be dropped once you build enough equity. Because Orange County's 2026 FHA and conforming ceilings both stretch to $1,249,125 in high-cost areas, either program can reach OC's pricier homes. Choice Home Mortgage compares both and tells you honestly which fits. Call (949) 522-7310.
The longer answer.
FHA and conventional solve the same problem — buying with limited cash and imperfect credit — from different angles. FHA's 3.5% down and 580-credit floor make it the more forgiving entry point for a buyer whose credit is still building or whose savings are thin. Conventional's 3% down minimum is technically lower, but the credit bar (generally around 620-plus for solid terms) is a real gate that FHA doesn't set as high.
The mortgage insurance difference is where the two programs really part ways over the life of the loan. FHA's MIP — both an upfront charge and an ongoing annual premium — is close to a fixed cost of the program; for many FHA borrowers it runs for the full loan term regardless of how much equity builds. Conventional PMI, by contrast, is temporary: once you cross roughly 20% equity, it can be removed, lowering your payment without refinancing.
Which one actually costs less over time depends heavily on your specific down payment and credit profile — a borrower with 620 credit and 10% down might land in a very different place under FHA versus conventional than a borrower with 700 credit and 15% down. That comparison is exactly what a broker should run for you before you pick a lane, rather than assuming FHA is 'the low-down-payment loan' by default.
Related reading: FHA mortgage hub · Conventional loans in Orange County · Conventional loan credit score requirements · Start your application
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