FHA vs Conventional Loans – Live Rate & Payment Comparison

Think FHA loans are always worse than conventional? Not always. In our livestream, we break down when FHA can outperform conventional, especially for borrowers with 620–660 credit scores.

We’ll compare credit flexibility, down payments, and mortgage insurance, plus share live rate and payment scenarios to show why FHA can sometimes lead to a lower monthly payment. Learn how looking past the headline rate can save you money.

📲 Feel free to leave comments or ask questions throughout the stream — we’re here to help!

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👉 https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

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The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages...

Transcript

We always wanna start with the ten-year treasury. Typically, that's the best indicator of rates, overall, especially when we're comparing different programs: non-QM, commercial, conventional, all the different options. We wanna typically make sure that we have a why. Did I lose my review of the rates here? So in the last five days, it's gone up a little bit with some of the news, but we always wanna pull this out to one year, to make sure we're looking at the overall perspective.

And you can see we're pretty much still at one-year lows here. So in general, it's definitely still a good time overall for all our different rate programs. And now let's get into our actual live rates for today. So, to compare across all our standard programs, we always set up a basic scenario: a single-family home, $500,000 purchase, $300,000 loan amount, let's do 60% loan to value, 760 FICO credit score, 40% net to income. That way, we can see the best rate options across all the different programs.

And our option here, we always compare our conventional, primary, performing loans. Typically, what most people think of when they think of a mortgage is, rate as low as 5.875, finally, par 6.123. And if our customer doesn't qualify for conventional for any reason—or in our example for today—wants to compare conventional, we want to look at FHA next. FHA allows a little more leniency on credit issues and a higher debt-to-income ratio, but does require upfront and yearly mortgage insurance.

It's one of the things we'll look at today. So FHA comes in at 5.25 rate, but with all the fees included, final APR comes in at 6.129. That's why we always wanna compare the APR. If our customer qualifies for VA programs—are eligible vets, active service members, and surviving spouses—these programs are amazing. Rates today come in as low as 5.375.

With the much lower fees here for VA, final APR 5.615, much better than any of the other options. So typically, the best option for our eligible borrowers. And moving on to USDA—that's for properties in USDA-eligible areas. That's typically the rural areas of the country.

Rates today come in at 5.125. Final APR, 5.802 with all the fees included. So typically, our customer—they'd be shopping in this area and do qualify for the income limits. We'll be comparing this to FHA and conventional. USDA is a touch cheaper today.

And we love our non-QM programs here at The Mortgage Calculator. This is where we have tons of different options. So non-QM allows us to use alternative docs. Customer doesn't qualify for conventional, FHA, or any of the other standard options. And especially our self-employed borrowers, we may need to use alternative documentation such as bank statements, 1099s, all statements, etc.

So typically, our customer may not qualify for conventional and may have to switch to our alt doc option, but rates today almost identical: 6% rate. Finally, par 6.272. So very comparable there to conventional and even FHA in our example here. And we can use alt docs for our investment properties as well, coming at 6.125, finally par 6.448, to use alternative docs to purchase an investment property there.

And we'll compare that to our conventional options for an investment property. Coming in today, again, same rate, 6.125, finally par 6.438. Just a touch cheaper to use our conventional option. And our favorite programs here—or at least my personal favorite—our DSCR. No income or employment needed.

Just the estimated rents from the property to determine the DSCR ratio. It stands for debt service coverage ratio. If the estimated rents can cover the expenses, that means the ratio is 1.00 or higher, which is what we use for this example here, aka the property cash flows. And the example has a three-year prepayment penalty, which is standard for these programs. 5.999 rate today.

Finally, par 6.222. Beating conventional, beating all—absolutely amazing. And we can add a five-year prepay to sweeten the deal. Rates come in today as well as 5.275. Final APR, 6.193. Again, beating all the other options, our DSCR. And we do have our DSCR option as well with no prepayment penalty. Some states don't allow it, and some borrowers don't wanna have a prepayment penalty. No problem. Rate today, 6.125.

Finally, par 6.448. So just a touch higher than conventional there to have no prepayment penalty. Again, pretty amazing to use. No income or employment info. We also have our second mortgages and tons of other programs.

So please get with our team members if you'd like a full itemized loan estimate for any of our options here. Let's get into a deep dive today, and we're gonna be comparing our conventional to FHA. You hear me talk about this every day on our first two examples, but we're gonna go over the actual reason why we would wanna use one for C. So first thing we have here is our example property. So here we have just a standard home here in the area where I'm at, and pricing on a nonstandard single-family home so we can set up our basic scenario.

So what I actually set up is a $575,000 purchase price. Maybe we got it down a little bit here. But first, let's look at our FHA. So FHA, our borrowers will typically want to put the 3.5% down payment, and this is that exact one we just looked at. And you can see here in the notes, I put this as our most common request.

And what we did here is we sent to a 620 FICO credit score so that we can compare to conventional. So conventional typically has a minimum of 620 FICO credit score. And we're typically going to see the biggest difference here when we have a lower score and we're looking to compare FHA versus conventional.

So since FHA has a standard set rate of 0.55% for the MI, it's going to equal only $254 per month in this scenario. So here we have our standard FHA rate choices here. We even have an option with some lender credit, as it was 5.625 here, costing 1.611. And we have our option for some lender credits here, 6.625 rate for a little bit of lender 0.273 towards our closing costs.

So, again, the scenario here was the down payment was a standard minimum, the purchase price I mentioned before for that exact property. This 620 FICO score allows us to get $254 monthly mortgage insurance in this scenario. And that is added here to the payment. You see the monthly payment with an MI. So we have a pretty standard lowest payment option here of $3,504 a month.

Now when we switch to conventional, the credit score, instead of having a set rate for MI coverage, we have private mortgage insurance. We need this rated, and it's quoted based on the credit score. So 620 is typically the minimum. This is going to be the highest cost that we see on our PMI. So here with our conventional, we use 3.5% down payment. That's only possible for first-time homebuyers, just so everybody knows. I put “first buyer” here in this example, so we could compare apples to apples: same down payment, same everything.

And with the 620 credit score and a standard MI at 620, you can see here, I didn't wanna blow it in the start—you can see here our rates as low as 6.5, and we have a par rate of 6.99. So the rates are a little bit higher, but the MI here, let me scroll down, comes in at a whopping $1,200 a month here for the PMI. So this is where you see a big difference.

It's probably the highest cost PMI we could quote. I did scenarios, and it didn't even qualify. I had to lower the DTI in order to even get a quote. So, these are maxing out the PMI limits here, and, of course, we do have some lender options to have reduced PMI when we do order the PMI through them. So this isn't the end-all, be-all, but I wanted to provide an example.

So you see here, with almost a thousand dollars more per month, our lowest payment option for conventional for our low-FICO borrower in this instance is gonna be $4,646. And when we switch back over to FHA, $3,504. So big difference there in the monthly payment. Obviously, that's going to affect the qualifications as well.

So you see here, we typically wanna use FHA when we can, when it's possible, of course. And typically, it's the more lenient option when our borrower has a lower credit profile. And remember, when you see our live rate examples that we go over, it doesn't make that big of a difference here because our higher-credit borrowers, with the 760 FICO in these examples, there isn't that much of a difference between the conventional and FHA. But a very drastic difference when we have a lower FICO borrower—definitely want to try to switch to FHA. That borrower is over a thousand dollars per month on their monthly payment—definitely probably helps that family a whole lot.

So that's our specific for today. Let me see if we have any questions. If you have any questions, please drop them in the chat there. And, of course, if you would like a full itemized loan estimate, we have licensed loan officers that would be happy to get that out for you. And I'll get you a full itemized breakdown for any of our loan programs. We have thousands of loan program options.

So I don't see any questions for today. I'll go ahead and wrap it up. We'll come back later this week. Happy holidays, everyone, and we'll be looking at some more live rates here soon. Thanks.