FHA loans are backed by the Federal Housing Administration and designed for borrowers with lower credit scores or smaller down payments. You can qualify with a credit score as low as 580 with 3.5% down, or even 500 with 10% down. The trade-off is mortgage insurance — FHA loans require both an upfront mortgage insurance premium of 1.75% and an annual premium that lasts for the life of the loan if you put less than 10% down.
Conventional loans are not government-backed and typically require a minimum credit score of 620 and a down payment of 3-20%. If you put down less than 20%, you pay private mortgage insurance (PMI), but unlike FHA insurance, PMI can be removed once you reach 20% equity. This is a major long-term advantage.
If your credit score is above 700 and you can put down 5% or more, conventional usually wins because of lower insurance costs and the ability to drop PMI. If your credit is below 680 or you need the absolute minimum down payment, FHA gets you into a home when conventional might not. The best approach is to compare offers for both loan types side by side.