Conventional vs FHA. In Utah, this is the most common question I get from first-time buyers, and the answer isn't simple — it depends on your credit score, how much you have for down payment, how long you plan to stay, what you're buying, and a few rules that catch people off guard. Here's the full comparison, with actual Utah numbers.
The Quick Answer
If your credit score is 680 or higher and you can put 5% down, conventional usually wins on total cost. If your credit is between 580 and 639 — or you need a more flexible debt-to-income ratio — FHA is almost always the better fit. The grey zone is 640–679 credit, where the answer changes based on the specifics. The rest of this post walks through how to actually figure out which side of that line you fall on.
What These Loans Actually Are
Conventional loans are mortgages that aren't backed by the federal government. They're packaged and sold to Fannie Mae or Freddie Mac, which means they follow the conforming loan guidelines those agencies set. They're the most common mortgage type in Utah and in the country.
FHA loans are mortgages insured by the Federal Housing Administration. The FHA doesn't make the loan — your lender does — but the federal insurance allows lenders to relax credit and down payment requirements. They're specifically designed for buyers who are earlier in their financial journey.
Side-by-Side at a Glance
| Conventional | FHA | |
|---|---|---|
| Minimum down payment | 3% (Conventional 97, HomeReady) | 3.5% |
| Minimum credit score | 620 | 580 (3.5% down) / 500 (10% down) |
| 2026 Utah loan limit | $806,500 | ~$524,225 floor in most counties; much higher in Summit County |
| Upfront mortgage insurance | None | 1.75% of loan (rolled in) |
| Monthly mortgage insurance | PMI — cancels at 78% LTV | MIP — typically for life of the loan |
| Max DTI ratio | ~45% (50% in some cases) | Up to ~56.9% with compensating factors |
| Max seller concessions | 3%–9% (depends on down payment) | 6% |
| Owner-occupied required? | No (investment & second homes allowed) | Yes |
| Appraisal strictness | Standard | Stricter health/safety standards |
| Refinance options | Rate-and-term, cash-out | FHA Streamline (no appraisal, no income verification) |
| Compatible with UHC DPA | Yes | Yes |
Down Payment: How Much Cash Do You Actually Need?
Both programs offer low-down-payment options, but the cash picture once you add closing costs and reserves looks different.
FHA: 3.5% Down
On a $400,000 Utah home, 3.5% down is $14,000. FHA allows 100% of that to come from a gift, a DPA program, or even seller concessions (within the 6% cap). The 1.75% upfront MIP gets rolled into the loan, so it doesn't come out of pocket at closing. You'll still need roughly $8,000–$12,000 in closing costs and prepaids unless the seller is paying.
Conventional: 3%, 5%, 10%, or 20% Down
Conventional has more flexible down payment tiers:
- 3% down (Conventional 97, HomeReady, Home Possible): $12,000 on a $400K home. HomeReady and Home Possible add income limits but reduce PMI further.
- 5% down: $20,000 on $400K. PMI drops noticeably here for buyers with average credit.
- 10% down: $40,000 on $400K. PMI drops again, and you'll cancel it faster.
- 20% down: $80,000 on $400K. No PMI at all — the cheapest monthly option if you can swing the cash.
Critically, conventional allows 100% of your down payment to come from a gift on Conventional 97 and HomeReady purchases for first-time buyers — so the "FHA is the gift-friendly loan" myth is outdated.
Credit Scores: Where Each Loan Wins
This is the single biggest factor that decides which loan saves you money over time.
| Credit score range | Better choice (usually) | Why |
|---|---|---|
| 500–579 | FHA only | Conventional won't approve. FHA allows down to 500 with 10% down. |
| 580–619 | FHA | Conventional starts at 620. FHA's pricing is flat regardless of score. |
| 620–639 | FHA (usually) | Conventional PMI is very expensive at this range — often more than FHA MIP. |
| 640–679 | Run both | The break-even zone. Loan officer should quote both and show you the math. |
| 680–719 | Conventional | PMI drops; total cost beats FHA for any hold longer than ~3 years. |
| 720+ | Conventional | PMI is minimal. Conventional wins decisively on every metric. |
Conventional pricing is risk-based — your rate and your PMI both depend on your credit score. FHA pricing is essentially flat — a 580 borrower and a 760 borrower pay the same MIP percentage. That's why FHA dominates the lower credit ranges and conventional dominates the higher ones.
Mortgage Insurance: The Make-or-Break Cost
This is where the long-term math gets interesting. Conventional and FHA handle mortgage insurance very differently, and over 7–10 years the gap is often $10,000–$20,000.
FHA's MIP
FHA charges two layers of mortgage insurance:
- Upfront MIP (UFMIP): 1.75% of the loan amount. Usually rolled into the loan rather than paid in cash, so on a $386,000 loan that's $6,755 added to your principal.
- Annual MIP: 0.55% per year for buyers putting less than 5% down on a standard 30-year FHA loan. That's roughly $177/month on the same $386,000 loan.
The key issue: for FHA loans with less than 10% down, MIP lasts the entire life of the loan. You cannot cancel it. The only way out is to refinance into a conventional loan, which requires you to qualify for conventional at that point.
Conventional's PMI
PMI is monthly only — there's no upfront premium. The rate is set by the PMI company based on your credit score, LTV, and DTI. Typical ranges:
- 3% down, 760 credit: roughly 0.25% per year
- 3% down, 700 credit: roughly 0.45% per year
- 3% down, 660 credit: roughly 0.85% per year
- 3% down, 620 credit: roughly 1.35% per year
- 5% down typically reduces PMI by 10%–20%
- 10% down typically reduces PMI by 30%–50%
The critical advantage: PMI cancels automatically when your loan-to-value drops to 78%. You can request earlier cancellation at 80% LTV based on the original purchase price, or earlier still based on a current appraisal showing appreciation. In Utah's appreciating market, many conventional buyers cancel PMI within 3–5 years.
Real Cost Comparison: $400,000 Utah Home, 5% Down, 7-Year Hold
| Conventional (700 credit) | FHA (700 credit) | |
|---|---|---|
| Loan amount (after UFMIP if any) | $380,000 | $393,755 |
| Monthly PMI/MIP (year 1) | ~$130 | ~$179 |
| Years paying PMI/MIP | ~5 (with normal appreciation) | 30 (life of loan) |
| Approx. total PMI/MIP over 7 years | ~$7,800 | ~$15,000 + UFMIP $6,755 ≈ $21,755 |
At 700 credit, conventional saves roughly $14,000 over a 7-year hold in this scenario. The gap widens further for buyers with 720+ credit and narrows for buyers with 620–640 credit. These are illustrative numbers — your actual quotes will vary by lender, rate environment, and exact credit pull.
Loan Limits: How Much House Can You Buy?
The 2026 conforming conventional loan limit is $806,500 in every Utah county. FHA's loan limits vary by county and are reset annually by HUD:
- Most Utah counties (Cache, Davis, Salt Lake, Tooele, Utah, Weber, etc.): FHA floor of roughly $524,225 for 2026
- Summit County (Park City): high-cost designation, well over $1 million
- Wasatch County: moderately high, between floor and Summit
If you're buying above the FHA limit for your county, conventional is your only option below the conforming ceiling. Above $806,500 you're in jumbo loan territory and the rules change again.
Debt-to-Income: FHA's Flexibility Advantage
If your back-end DTI is above ~45%, FHA may be your only path to a yes. FHA officially allows up to 56.9% DTI with compensating factors (savings reserves, strong job history, low LTV). Conventional caps out at roughly 50% on the high side, and most lenders won't go above 45% without a very clean file.
For buyers with student loans, car payments, or other debt — common for younger Utah buyers — FHA's DTI flexibility can be the deciding factor even when the cost math says conventional is cheaper.
Property Type Rules: Where FHA Gets Picky
Condos
FHA requires the entire condo project to be FHA-approved. There's a list, and if your target condo isn't on it, you can't use FHA on that unit — period. Many Utah condo projects, especially newer or smaller HOAs, aren't approved. Conventional has no project-level approval requirement (though the lender will still ask for HOA documents).
Multi-Family (2–4 Units, "House Hacking")
Both loans allow 2–4 unit purchases if you live in one unit as your primary residence. FHA actually has an advantage here: you can use 3.5% down on a duplex, triplex, or fourplex. Conventional requires 15% down on a 2-unit and 25% on 3–4 units. FHA is the easier path for young Utah buyers who want to start house hacking — provided the property meets FHA's self-sufficiency test on 3–4 units.
Manufactured Homes
Both can finance manufactured homes, but the requirements get specific (permanent foundation, HUD tag, real property classification). FHA is often the more accessible path here for Utah's older manufactured housing stock.
Investment Properties & Second Homes
FHA is owner-occupied only. If you want an investment property or a vacation home, you need conventional (or specialty loans).
Appraisals: FHA's Stricter Standards
FHA appraisers don't just value the property — they inspect it against HUD's minimum property standards. Common issues that trigger required repairs before closing:
- Peeling paint on homes built before 1978 (lead-paint risk)
- Missing or damaged handrails on stairs
- Exposed wiring or broken electrical outlets
- Roof problems with less than 2 years of remaining life
- Active leaks or water damage
- HVAC systems that don't function
On older Utah housing stock — common in Ogden, parts of Salt Lake City, or rural counties — FHA appraisals can require seller repairs that derail negotiations. Conventional appraisals don't have the same checklist. In a competitive offer situation, an FHA buyer is sometimes at a disadvantage purely because of how sellers perceive the appraisal risk.
Seller Concessions
Seller concessions are credits the seller can give you toward closing costs.
- FHA: Up to 6% of the purchase price.
- Conventional, <10% down: Up to 3%.
- Conventional, 10%–25% down: Up to 6%.
- Conventional, >25% down: Up to 9%.
For low-down-payment buyers, FHA's 6% cap is more generous than conventional's 3%. This can matter on a tight purchase where you need the seller to cover closing costs.
Refinancing Later: The "Buy Now, Refi Later" Strategy
One of the most common Utah moves I see: buyer gets FHA today because their credit is at 640, builds equity and credit for 18–36 months, then refinances into conventional to drop the MIP. This works — but you have to plan for it:
- You'll typically need 20% equity at refinance to drop PMI entirely (or pay PMI on the new conventional loan until you reach 78% LTV) — appreciation usually gets you there faster than principal paydown alone
- Your credit should be 620+ at the time of the refi (most lenders prefer 680+ for the best rates)
- Rates have to be favorable enough that the new loan beats the FHA's MIP cost
For buyers in this position, FHA functions as a "starter loan." It's a valid strategy, but the savings depend on what rates do and how fast the property appreciates.
FHA also has its own streamline refinance — no appraisal, no income verification, just a lower rate. It's easy to qualify for, but you stay in FHA (and keep MIP) forever unless you also refinance into conventional at some point.
Combining With Utah Down Payment Assistance
Both loan types pair with most Utah DPA programs, with some specifics:
- Utah Housing Corporation: Offers DPA on both FHA and conventional first mortgages. Their FirstHome and HomeAgain programs run on FHA; the NoMI program is conventional-only and avoids PMI entirely on UHC's first mortgage.
- County DPA (Salt Lake, Utah, Davis, Weber): Most work with either FHA or conventional. The forgivable loans in Davis and Weber stack with either.
- SB240 New Construction Grant: Compatible with both, paired most often with UHC's first mortgage.
The loan choice doesn't lock you out of DPA. Pick the mortgage that makes the most sense for your situation, then layer on whatever down payment assistance you qualify for.
Which One Should You Actually Choose?
Here's the decision framework I use with Utah buyers:
Pick FHA if you have:
- Credit score under 660
- DTI above 45%
- Less than 5% available for down payment with strong gift fund support
- Older property that may have inspection issues (only if it'll still pass FHA appraisal)
- Plans to refi to conventional within 2–3 years as credit improves
Pick conventional if you have:
- Credit score 680+
- 5%+ down payment available
- A purchase price above the FHA county loan limit
- Long-term hold plans (5+ years) where canceling PMI matters
- Plans to buy a second home or investment property in the future
- A condo in a non-FHA-approved project
Run both quotes if:
- Credit is between 640 and 679
- You're at the edge of FHA's county loan limit
- You're house hacking a 2–4 unit property
The Bottom Line
Conventional and FHA aren't competitors — they're tools for different situations. The mistake I see Utah buyers make most often is picking based on what their friend or coworker used, instead of what their own credit score and timeline actually call for. A buyer with 700 credit who picks FHA because "it's the first-time buyer loan" can lose $15,000+ over seven years. A buyer with 620 credit who insists on conventional often gets quoted a PMI rate that makes the monthly payment unaffordable.
Have a lender quote both, run the actual numbers for your home price and credit score, and compare total cost over the period you actually plan to own the home. The right loan is the one that wins that math — not the one with the name everyone recognizes.
Want a deeper dive on either program? See our complete guides to Conventional Loans in Utah and FHA Loans in Utah. For the narrower 3% down comparison, our Conventional 97 vs FHA post runs the cost math on the lowest-down-payment scenarios specifically.