Your credit score is in the mid-600s, and you're ready to buy a home. You've heard about FHA loans being "easier" for lower credit scores, but you're also seeing conventional options. Which path actually saves you money, fits your timeline, and sets you up for long-term success? The answer isn't one-size-fits-all—it depends on your down payment, how long you plan to stay, and whether you can push your credit score a bit higher before closing.

FHA vs. Conventional in 2026 for 620–699 FICO

Quick Summary

• •
  FHA typically offers lower rates for 620–679 FICO but requires mortgage insurance for the life of the loan (unless you put 10%+ down and pay it for 11 years).
• •
  Conventional at 620–679 often has higher rates but can drop PMI automatically at 78% LTV, potentially saving thousands over time.
• •
  At 680–699 FICO, conventional often becomes competitive or better than FHA, especially with 5%+ down.
• •
  The break-even point depends on how long you'll own the home, your down payment, and whether you can refinance later.

FHA vs. Conventional: The Basics

Both FHA and conventional loans are available for borrowers with 620–699 credit scores, but they work differently:

FHA Loans:

• •Government-backed (FHA insurance protects the lender)
• •
  Minimum credit score: 580 for 3.5% down, 500–579 for 10% down
• •
  Down payment: 3.5% minimum (can be gifted)
• •
  Mortgage insurance: Upfront MIP (1.75% of loan amount, can be financed) + Annual MIP (0.45%–0.85% of loan balance, typically for life of loan)
• •
  Debt-to-income (DTI): Often allows up to 50%+ with compensating factors
• •Property types: 1–4 units, primary residence only

Conventional Loans:

• •Privately backed (Fannie Mae/Freddie Mac guidelines)
• •
  Minimum credit score: 620 (some lenders go to 620, others require 640–660+)
• •
  Down payment: 3% minimum for first-time buyers, 5%+ for others
• •
  Mortgage insurance: PMI (0.2%–2.25% annually, typically drops at 78% LTV or can be removed at 80% with appraisal)
• •
  Debt-to-income (DTI): Usually capped at 45%–50% depending on credit and down payment
• •Property types: 1–4 units, primary, second home, or investment

Credit Score Ranges: Where Each Loan Shines

620–659 FICO: FHA Often Wins (But Not Always)

At this range, FHA is usually the easier path:

• •
  FHA: Rates typically 0.25%–0.75% lower than conventional for this credit band. Lenders price FHA more aggressively because the government guarantee reduces their risk.
• •
  Conventional: You'll pay a credit score adjustment (LLPA) that can add 0.5%–1.5% to your rate. Some lenders won't even offer conventional below 640.

Example: $300,000 loan, 30-year fixed

• •
  FHA at 6.5%: $1,896/month (P&I) + $188/month (MIP) = $2,084/month
• •
  Conventional at 7.25%: $2,047/month (P&I) + $150/month (PMI) = $2,197/month

FHA saves $113/month initially, but MIP stays for life (unless you put 10%+ down and pay it for 11 years). Conventional PMI drops at 78% LTV.

When FHA makes sense:

• •You're staying 5–7 years or less
• •You can't get to 680+ credit before closing
• •You need the higher DTI flexibility
• •You're putting 3.5%–5% down

When to consider conventional anyway:

• •You're putting 10%+ down (conventional PMI can be cheaper and removable)
• •You plan to stay 10+ years (PMI removal matters more)
• •You can get a co-signer or improve credit to 660+ before closing

660–679 FICO: The Tipping Point

This is where it gets interesting. Conventional starts becoming competitive:

• •
  FHA: Still often 0.125%–0.375% lower rate, but MIP is permanent.
• •
  Conventional: Credit adjustments shrink. You might see rates within 0.25% of FHA, and PMI is removable.

Example: $300,000 loan, 30-year fixed, 5% down

• •
  FHA at 6.375%: $1,872/month (P&I) + $188/month (MIP) = $2,060/month (MIP stays)
• •
  Conventional at 6.625%: $1,920/month (P&I) + $125/month (PMI) = $2,045/month (PMI drops at ~$234,000 balance)

Conventional is cheaper from day one, and PMI removal saves another $125/month later.

When conventional wins:

• •You're putting 5%+ down
• •You plan to stay 7+ years
• •You can get to 680+ before closing (even better)

680–699 FICO: Conventional Usually Wins

At this range, conventional typically offers better long-term value:

• •
  FHA: Still available, but you're paying for government insurance you may not need.
• •
  Conventional: Rates are competitive or better, PMI is removable, and you have more flexibility (second homes, investment properties later).

Example: $300,000 loan, 30-year fixed, 5% down

• •
  FHA at 6.25%: $1,847/month (P&I) + $188/month (MIP) = $2,035/month (MIP stays)
• •
  Conventional at 6.125%: $1,822/month (P&I) + $100/month (PMI) = $1,922/month (PMI drops at ~$234,000 balance)

Conventional saves $113/month initially and $188/month after PMI removal.

Down Payment: The Game Changer

Your down payment affects both loan types differently:

3%–4.99% Down:

• •
  FHA (3.5% min): Usually the better rate, but MIP is permanent.
• •
  Conventional (3% min, first-time buyers): Higher rate, but PMI is removable. Often a wash unless you're staying long-term.

5%–9.99% Down:

• •
  FHA: Still competitive rate, but MIP stays.
• •
  Conventional: Rate gap narrows, PMI is cheaper and removable. Often wins if you're staying 7+ years.

10%+ Down:

• •
  FHA: MIP can be removed after 11 years (if you put 10%+ down).
• •
  Conventional: PMI is cheaper and removable at 80% LTV (or automatically at 78%). Usually the better choice.

Mortgage Insurance: The Hidden Cost

This is where many borrowers get surprised:

FHA MIP (Mortgage Insurance Premium):

• •
  Upfront: 1.75% of loan amount (can be financed into the loan)
• •
  Annual: 0.45%–0.85% of loan balance, divided by 12 (monthly payment)
• •
  Duration: For life of loan if you put <10% down. If you put 10%+ down, MIP can be removed after 11 years.

Conventional PMI (Private Mortgage Insurance):

• •
  Annual: 0.2%–2.25% of loan amount, divided by 12 (monthly payment)
• •
  Duration: Until you reach 78% LTV (automatic) or 80% LTV (with appraisal/request)

The Math:

• •
  $300,000 FHA loan, 3.5% down: ~$188/month MIP, stays for 30 years = $67,680 over loan life
• •
  $300,000 conventional loan, 5% down: ~$125/month PMI, drops at 78% LTV (~year 8) = ~$12,000 total

Even if FHA has a slightly lower rate, the permanent MIP often costs more over time.

When to Choose FHA

FHA makes sense when:

• •
  Credit is 620–659 and you can't improve it before closing
• •
  You're putting 3.5%–5% down and staying 5–7 years or less
• •
  You need higher DTI flexibility (FHA often allows 50%+ with compensating factors)
• •
  You're buying a fixer-upper (FHA 203(k) renovation loans are more accessible)
• •
  You have a bankruptcy/discharge (FHA has shorter waiting periods: 2 years post-discharge vs. 4 years for conventional)

When to Choose Conventional

Conventional makes sense when:

• •
  Credit is 660+ (especially 680+)
• •
  You're putting 5%+ down and staying 7+ years
• •
  You want PMI removal flexibility (can drop at 80% LTV with appraisal)
• •
  You might buy a second home or investment property later (conventional gives you more options)
• •
  You're refinancing and your credit improved (conventional often better at 680+)

Can You Improve Your Credit Before Closing?

If you're at 620–679, even a 20–40 point improvement can change the math:

Quick wins (can happen in 30–60 days):

• •Pay down credit card balances to <30% utilization (ideally <10%)
• •Dispute any errors on your credit report
• •Don't open new accounts or close old ones
• •Make all payments on time

If you can get to 680+:

• •Conventional often becomes the better choice
• •You'll save on both rate and PMI removal
• •More lender options and better pricing

Timeline matters: If you're under contract with a 30–45 day close, you might not have time. But if you're pre-approved and shopping, 60–90 days of credit work can pay off.

The Refinance Strategy

Many borrowers use FHA as a "stepping stone":

1. •
   Buy with FHA at 620–659 credit, 3.5% down
2. •
   Build equity and improve credit over 2–3 years
3. •
   Refinance to conventional at 680+ credit, drop PMI, get a better rate

This works if:

• •You can improve credit 40–60 points in 2–3 years
• •Home values stay stable or appreciate
• •You have enough equity to refinance (usually need 80% LTV or better)

The risk: If rates go up or home values drop, you might be "stuck" with FHA MIP longer than planned.

Real-World Example: 650 FICO, 5% Down, $300,000 Home

Scenario A: FHA

• •Rate: 6.5%
• •Down payment: $15,000 (5%)
• •P&I: $1,896/month
• •MIP: $188/month (permanent)
• •
  Total: $2,084/month

Scenario B: Conventional

• •Rate: 7.0%
• •Down payment: $15,000 (5%)
• •P&I: $1,996/month
• •PMI: $125/month (drops at ~$234,000 balance, ~year 8)
• •
  Total: $2,121/month initially, $1,996/month after PMI removal

Year 1–7: FHA saves $37/month = ~$3,100 over 7 years

Year 8–30: Conventional saves $88/month = ~$24,200 over 23 years

Total savings: Conventional saves ~$21,100 over the loan life, but FHA is cheaper for the first 7 years.

The decision: If you're staying 5–7 years, FHA wins. If you're staying 10+ years, conventional wins.

What To Do Next

1. •

   Get pre-approved with both loan types — See actual rates and PMI/MIP costs for your credit score and down payment. Don't guess—get real numbers.

2. •

   Calculate the break-even point — Use a mortgage calculator to see when conventional PMI removal makes it cheaper than FHA. Factor in how long you plan to own the home.

3. •

   Consider credit improvement timeline — If you're at 640–679 and can get to 680+ in 60–90 days, it might be worth waiting. Ask your loan officer if a 20–40 point improvement changes the math.

4. •

   Factor in your down payment — If you're putting 10%+ down, conventional usually wins. If you're at 3.5%–5%, run the numbers for your specific scenario.

5. •

   Think about your long-term plans — Are you likely to move in 5–7 years? FHA might be fine. Planning to stay 10+ years? Conventional PMI removal matters more.

Quick FAQ

Can I get conventional with 620 credit?

Yes, but it's lender-dependent. Some lenders require 640–660 minimum. FHA is more consistent at 620–639.

Does FHA MIP ever go away?

If you put <10% down, MIP stays for the life of the loan. If you put 10%+ down, MIP can be removed after 11 years (and you must have made payments for 11 years).

Can I remove PMI early on conventional?

Yes. Once you reach 80% LTV (based on original purchase price or current appraised value), you can request PMI removal. It automatically drops at 78% LTV based on the original amortization schedule.

Which has lower closing costs?

FHA typically has slightly higher closing costs due to upfront MIP (1.75% of loan amount), but this can be financed into the loan. Conventional closing costs are usually lower, but you'll pay PMI monthly.

Can I refinance from FHA to conventional later?

Yes, if you have enough equity (usually 80% LTV or better) and your credit improved. This is a common strategy to drop MIP and get a better rate.

What if my credit is exactly 680?

At 680, you're right at the tipping point. Get quotes for both loan types—the rate difference might be minimal, and conventional PMI removal often makes it the better long-term choice.