One of the most common decisions homebuyers face in South Florida is the conventional FHA loan comparison (see CFPB loan guide). Both can get you into a home — but they’re designed for different borrowers, and picking the wrong one can cost you tens of thousands of dollars over the life of your loan. Here’s a straightforward breakdown of how they differ and which one tends to make more sense depending on your situation.
What Is a Conventional Loan?
A conventional loan is any mortgage not backed by a government agency. Most conventional loans follow the guidelines set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that purchase mortgages from lenders. Because lenders can sell these loans, they’re able to offer competitive rates to borrowers who meet the credit and income requirements.
Conventional loans are available in two main categories: conforming (within Fannie/Freddie loan limits — $806,500 for a single-family home in Broward County for 2025) and jumbo (above those limits).
What Is an FHA Loan?
An FHA loan is insured by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). Because the government backs the loan, lenders are willing to approve borrowers with lower credit scores and smaller down payments. FHA loans were originally created to make homeownership accessible to first-time buyers and those rebuilding their financial profiles — and they still serve that purpose today.
Conventional FHA Loan: Side-by-Side Comparison
Minimum Credit Score
Conventional: Typically 620 minimum, though rates improve significantly above 700 and again above 740–760.
FHA: 580 with a 3.5% down payment; as low as 500 with 10% down (though many lenders impose their own “overlay” minimums of 580–620).
Verdict: FHA wins for borrowers with credit scores below 660. Above 680, conventional becomes more competitive on both rate and cost.
Down Payment
Conventional: As low as 3% (for first-time buyers via Fannie Mae HomeReady or Freddie Mac Home Possible) or 5% for most borrowers. Investment properties and second homes require more.
FHA: 3.5% with a 580+ credit score; 10% with a 500–579 score.
Verdict: Similar minimum down payments, but FHA is more accessible because the credit score bar is lower.
Mortgage Insurance
This is where the real cost difference shows up — and it’s significant.
Conventional: Private mortgage insurance (PMI) is required when you put less than 20% down, but it’s automatically removed once your loan-to-value ratio reaches 78% (or you can request removal at 80%). PMI rates typically range from 0.20% to 1.50% of the loan annually, depending on your credit score and down payment.
FHA: Requires both an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount (usually rolled into the loan) plus an annual mortgage insurance premium (MIP) of 0.55% – 1.05% depending on the loan term and LTV. Here’s the critical catch: FHA MIP lasts for the life of the loan if you put less than 10% down. The only way to eliminate it is to refinance into a conventional loan.
Verdict: Conventional wins on long-term mortgage insurance cost for borrowers who plan to stay in the home. FHA’s lifetime MIP can add $30,000–$50,000+ over a 30-year loan compared to a conventional PMI that drops off.
Interest Rates
Conventional: Rates are credit-score-sensitive. With a 760+ score, conventional rates are typically the best available. With a 620 score, the rate premium can be significant.
FHA: Rates are generally lower than conventional for the same credit profile, but the mandatory MIP largely offsets this advantage when comparing the total cost of borrowing.
Verdict: When you factor in MIP, FHA’s rate advantage typically disappears — especially over a longer hold period.
Loan Limits
Conventional: Up to $806,500 for conforming loans in Broward County (2025 limit). Higher with jumbo products.
FHA: Up to $621,900 for single-family homes in Broward County (2025 FHA limit). This is a meaningful restriction in South Florida’s market, where median home prices in communities like Cooper City often exceed $600,000.
Verdict: Conventional has the edge for higher-priced South Florida homes. Many buyers in Cooper City, Weston, and Parkland are priced out of FHA limits entirely.
Property Requirements
Conventional: Flexible. The home just needs to be in reasonable condition and appraise at or above the purchase price.
FHA: Stricter minimum property standards (MPS). The property must be safe, sound, and secure. Things like peeling paint, exposed wiring, non-functional HVAC, or roof issues that a conventional appraiser might flag as a note can cause an FHA loan to be denied or delayed until repairs are made.
Verdict: Conventional is more flexible, especially when buying older homes, fixer-uppers, or properties that need work.
When an FHA Loan Makes Sense
- Your credit score is below 660 and you need the most accessible path to homeownership
- You’re a first-time buyer with limited savings and need the lowest possible down payment with a moderate credit profile
- You’ve gone through a bankruptcy or foreclosure and are rebuilding credit — FHA waiting periods are typically shorter than conventional
- You’re buying a move-in-ready home priced below the FHA loan limit in Broward County
When a Conventional Loan Makes More Sense
- Your credit score is 680 or above — especially 720+
- You’re buying a higher-priced home in Cooper City or elsewhere in South Florida that exceeds FHA limits
- You want to avoid lifetime mortgage insurance and plan to keep the loan long-term
- The property has cosmetic issues or deferred maintenance that might fail FHA’s property standards
- You’re purchasing a second home or investment property (FHA is for primary residences only)
The FHA-to-Conventional Refinance Strategy
A common approach for buyers who qualify for FHA but want to eventually eliminate MIP: use FHA to get into the home now, then refinance into a conventional loan once you’ve built 20% equity or improved your credit score. This can work well — but it’s important to run the numbers. If rates rise between purchase and refi, the savings from eliminating MIP may be offset by a higher rate. Your mortgage broker can model both scenarios for you.
Get a Side-by-Side Quote for Your Situation
Whether you’re weighing a conventional vs FHA loan, the right choice depends on your credit, your savings, the property, and how long you plan to stay. At Royal Capital Solutions, we run both scenarios for every client so you can see exactly what each option costs — upfront and over time. We work with buyers across Cooper City, Davie, Pembroke Pines, Weston, Hollywood, and Miramar.
Call or text (954) 625-5736 or reach out at royalcapitalsolution.com/contact to get your personalized comparison today.