When you\u2019re buying your first home, two loan types dominate the conversation: FHA and conventional. Most buyers pick one based on what their lender recommends or what they\u2019ve heard from friends. But there\u2019s one detail that almost nobody mentions upfront \u2014 and it can cost you tens of thousands of dollars over the life of your loan.<\/p>\n\n\n\n
Conventional loans<\/strong> are the standard mortgage product, backed by Fannie Mae or Freddie Mac. They require good credit (typically 620+, with better pricing at 740+) and a minimum 3% down payment. Private mortgage insurance (PMI) is required when you put down less than 20% \u2014 but here\u2019s the key: it cancels automatically once you reach 20% equity.<\/strong><\/p>\n\n\n\n FHA loans<\/strong> are government-backed loans designed for buyers with thinner credit files or smaller savings. They allow a 3.5% down payment with a credit score as low as 580, and underwriting is more flexible. They sound like the obvious choice for first-time buyers \u2014 but the fine print changes everything.<\/p>\n\n\n\n FHA loans come with two kinds of mortgage insurance:<\/p>\n\n\n\n Upfront MIP (1.75%)<\/strong> \u2014 charged at closing and usually financed into the loan. On a $350,000 loan, that\u2019s $6,125 added to your balance before you make a single payment.<\/p>\n\n\n\n Annual MIP (0.55% for most loans)<\/strong> \u2014 charged monthly for the life of the loan if you put down less than 10%.<\/p>\n\n\n\n That last part is the one that stings. With a conventional loan, PMI disappears once you hit 20% equity \u2014 usually within 7\u201310 years on a standard loan, or faster if you make extra payments. With FHA and less than 10% down, the mortgage insurance never goes away.<\/strong> The only exit is refinancing into a conventional loan later.<\/p>\n\n\n\n On a $350,000 home with 3.5% down at 6.75%:<\/p>\n\n\n\nThe Detail Nobody Tells You<\/h3>\n\n\n\n
What That Looks Like in Real Numbers<\/h3>\n\n\n\n