Q: Why doesn't FHA MIP cancel like conventional PMI?

FHA changed the MIP cancellation rules in 2013. Before 2013, FHA MIP cancelled at 78% LTV similar to conventional PMI. After 2013, MIP lasts the life of the loan if your initial down payment was less than 10%; it cancels after 11 years if you put 10%+ down. The change was made to shore up the FHA insurance fund's reserves after the 2008 housing crisis. To escape FHA MIP, you must refinance into a conventional loan once you reach 80% LTV. The refinance has its own closing costs (~2-5% of loan amount), which need to be offset by the MIP savings to be worthwhile.

Q: Can I get a VA loan with bad credit?

Possibly. The VA itself doesn't set a minimum credit score, but most VA-approved lenders require 620 FICO. Some lenders work with VA borrowers down to 580 or even 550 FICO with stronger compensating factors (high income, residual income reserves, low DTI). The VA's residual income calculation is unique — it ensures borrowers have enough money left over after housing + debt to cover food, transportation, utilities. Eligible borrowers below 620 FICO should shop multiple VA-approved lenders rather than assuming they're declined — Veterans United and Navy Federal are known for more flexible VA underwriting.

Q: What's the difference between FHA loan limits and conventional loan limits?

FHA loan limits in 2026 are $541,287 in standard counties and $1,249,125 in high-cost counties. Conventional conforming limits are $766,550 standard and $1,149,825 high-cost. FHA limits are calculated as 65% of conventional conforming limits. For homes priced above the FHA limit, you'd need a conventional jumbo loan or the FHA loan would only cover up to the limit (you'd pay the difference in cash or with a second mortgage). High-cost counties are designated by HUD based on local home prices — California, Hawaii, NY metro, DC metro, Massachusetts, Connecticut have many high-cost counties.

Q: Are there closing cost differences between loan types?

Yes, modestly. FHA, VA, and USDA all charge upfront mortgage insurance fees (FHA UFMIP 1.75%, VA funding fee 1.25-3.3%, USDA upfront fee 1%) that are typically financed into the loan rather than paid out of pocket. Conventional has no upfront MI but PMI begins immediately if you have less than 20% down. Beyond MI, closing costs are similar across loan types: title insurance ($1,500-$3,500), appraisal ($500-$800), origination fees (lender-dependent — $0 at Better, 1-2% at most others), recording fees, transfer taxes. Total closing costs typically run 2-5% of the loan amount regardless of program.

Q: Can I switch from FHA to conventional later?

Yes, via refinance. The standard path: take an FHA loan now to buy with low down payment + lower credit requirements, then refinance to conventional once you reach 20% equity AND your credit improves. The refinance is a new loan with its own closing costs (~2-5% of loan amount, $7K-$17K on a $350K loan). To break even on the refinance, the monthly savings (no more MIP) needs to recoup the closing costs within 3-5 years. For most borrowers who started FHA at 3.5% down, the refi-to-conventional break-even happens around year 5-7 of ownership.

Q: What is conventional 97 LTV vs standard conventional?

Standard conventional loans typically require 5-20% down. Conventional 97 LTV loans (Fannie Mae HomeReady, Freddie Mac Home Possible) accept 3% down for first-time buyers (or any buyer for HomeReady/Home Possible). The 3% down version requires PMI until you reach 20% equity. Trade-offs vs FHA at similar low down payment: (a) higher PMI cost monthly initially, (b) PMI cancels automatically at 78% LTV (FHA MIP doesn't), (c) requires 700+ FICO typically (FHA accepts 580). For 700+ FICO buyers with 3% down, conventional 97 usually wins long-term.

Q: Should military families always use VA loans?

In most cases, yes — but with edge cases. VA loans win on cost almost always: 0% down, no ongoing MI, competitive rates, no loan limit for full-entitlement borrowers. Edge cases where conventional or FHA might be better: (a) Buying investment property (VA is primary residence only), (b) Already using VA entitlement on another property and don't have full entitlement remaining, (c) Buying a property the VA appraisal would reject (rare condos, manufactured homes on rented land), (d) Buying with a non-veteran co-borrower (can complicate VA underwriting). For 95%+ of eligible military families buying a primary residence, VA is the right choice.

Question 1

Is FHA always cheaper than conventional for low credit borrowers?

Accepted Answer

Often yes for FICO under 680, but not always. FHA's lifetime MIP (with <10% down) means total cost over 30 years can exceed conventional with cancellable PMI even when the monthly payment is initially lower. Run the math at FICO 660-680: if you can plausibly refinance to conventional within 5-7 years (after credit improves and you build equity), FHA-then-refi is often cheapest. If you'll stay in the FHA loan for 30 years, conventional with PMI may be cheaper despite the higher initial payment. Use the loan calculators on Bankrate or NerdWallet to compare specific scenarios.

Question 2

Why doesn't FHA MIP cancel like conventional PMI?

Accepted Answer

FHA changed the MIP cancellation rules in 2013. Before 2013, FHA MIP cancelled at 78% LTV similar to conventional PMI. After 2013, MIP lasts the life of the loan if your initial down payment was less than 10%; it cancels after 11 years if you put 10%+ down. The change was made to shore up the FHA insurance fund's reserves after the 2008 housing crisis. To escape FHA MIP, you must refinance into a conventional loan once you reach 80% LTV. The refinance has its own closing costs (~2-5% of loan amount), which need to be offset by the MIP savings to be worthwhile.

Question 3

Can I get a VA loan with bad credit?

Accepted Answer

Possibly. The VA itself doesn't set a minimum credit score, but most VA-approved lenders require 620 FICO. Some lenders work with VA borrowers down to 580 or even 550 FICO with stronger compensating factors (high income, residual income reserves, low DTI). The VA's residual income calculation is unique — it ensures borrowers have enough money left over after housing + debt to cover food, transportation, utilities. Eligible borrowers below 620 FICO should shop multiple VA-approved lenders rather than assuming they're declined — Veterans United and Navy Federal are known for more flexible VA underwriting.

Question 4

What's the difference between FHA loan limits and conventional loan limits?

Accepted Answer

FHA loan limits in 2026 are $541,287 in standard counties and $1,249,125 in high-cost counties. Conventional conforming limits are $766,550 standard and $1,149,825 high-cost. FHA limits are calculated as 65% of conventional conforming limits. For homes priced above the FHA limit, you'd need a conventional jumbo loan or the FHA loan would only cover up to the limit (you'd pay the difference in cash or with a second mortgage). High-cost counties are designated by HUD based on local home prices — California, Hawaii, NY metro, DC metro, Massachusetts, Connecticut have many high-cost counties.

Question 5

Are there closing cost differences between loan types?

Accepted Answer

Yes, modestly. FHA, VA, and USDA all charge upfront mortgage insurance fees (FHA UFMIP 1.75%, VA funding fee 1.25-3.3%, USDA upfront fee 1%) that are typically financed into the loan rather than paid out of pocket. Conventional has no upfront MI but PMI begins immediately if you have less than 20% down. Beyond MI, closing costs are similar across loan types: title insurance ($1,500-$3,500), appraisal ($500-$800), origination fees (lender-dependent — $0 at Better, 1-2% at most others), recording fees, transfer taxes. Total closing costs typically run 2-5% of the loan amount regardless of program.

Question 6

Can I switch from FHA to conventional later?

Accepted Answer

Yes, via refinance. The standard path: take an FHA loan now to buy with low down payment + lower credit requirements, then refinance to conventional once you reach 20% equity AND your credit improves. The refinance is a new loan with its own closing costs (~2-5% of loan amount, $7K-$17K on a $350K loan). To break even on the refinance, the monthly savings (no more MIP) needs to recoup the closing costs within 3-5 years. For most borrowers who started FHA at 3.5% down, the refi-to-conventional break-even happens around year 5-7 of ownership.

Question 7

What is conventional 97 LTV vs standard conventional?

Accepted Answer

Standard conventional loans typically require 5-20% down. Conventional 97 LTV loans (Fannie Mae HomeReady, Freddie Mac Home Possible) accept 3% down for first-time buyers (or any buyer for HomeReady/Home Possible). The 3% down version requires PMI until you reach 20% equity. Trade-offs vs FHA at similar low down payment: (a) higher PMI cost monthly initially, (b) PMI cancels automatically at 78% LTV (FHA MIP doesn't), (c) requires 700+ FICO typically (FHA accepts 580). For 700+ FICO buyers with 3% down, conventional 97 usually wins long-term.

Question 8

Should military families always use VA loans?

Accepted Answer

In most cases, yes — but with edge cases. VA loans win on cost almost always: 0% down, no ongoing MI, competitive rates, no loan limit for full-entitlement borrowers. Edge cases where conventional or FHA might be better: (a) Buying investment property (VA is primary residence only), (b) Already using VA entitlement on another property and don't have full entitlement remaining, (c) Buying a property the VA appraisal would reject (rare condos, manufactured homes on rented land), (d) Buying with a non-veteran co-borrower (can complicate VA underwriting). For 95%+ of eligible military families buying a primary residence, VA is the right choice.

Feature	FHA	Conventional	VA	USDA
Backed by	Federal Housing Administration (HUD)	Fannie Mae / Freddie Mac (private)	Veterans Affairs	USDA Rural Development
Minimum credit score	580 (with 3.5% down) / 500 (10% down)Best	620 typical (lower with manual underwriting)	No federal min (lender 620 typical)	640 most lenders
Down payment minimum	3.5% (with 580+ FICO)	3% (HomeReady/Home Possible) / 5% standard	0%Best	0%
Mortgage insurance UPFRONT	1.75% UFMIP (financed into loan)	NoneBest	VA funding fee 1.25-3.3% (waived for disabled vets)	1.0% upfront fee (financed)
Mortgage insurance ONGOING (annual)	0.55% MIP for most borrowers	PMI 0.5-1.5%/yr based on credit + LTV	$0 — noneBest	0.35%/yr
Mortgage insurance CANCELLATION	LASTS LIFE OF LOAN if <10% down; 11 yrs if 10%+ down	Cancels at 78% LTV automatic; can request at 80%	N/A — no ongoing MIBest	Cancels at 80% LTV
Loan limits 2026 (standard county)	$541,287	$766,550	No limit (full entitlement)Best	Varies by county, no formal max
Loan limits 2026 (high-cost county)	$1,249,125	$1,149,825	No limit (full entitlement)Best	Varies
Property condition requirements	Strict — must meet FHA Minimum Property Standards (no lead paint, structural issues, etc.)	Less strict — appraiser only flags major issuesBest	VA appraisal required, similar standards to FHA	Property must be in USDA-eligible area; condition standards similar to FHA
Property type eligibility	Primary residence only; condos must be FHA-approved	Primary, second home, investmentBest	Primary residence only	Primary residence only; rural/suburban areas
DTI (debt-to-income) maximum	Up to 50% with compensating factorsBest	43-50% typical	41% guideline (often flexible)	41% guideline
Income limits	NoneBest	HomeReady/Home Possible cap at 80% AMI; standard conventional has no cap	None	115% area median income
Best for	FICO 580-680 + low down payment + may need property repairs	FICO 700+ + 5%+ down + property options + cancellable MI	Eligible military/veterans (almost always wins)	Income-eligible buyers in USDA-eligible areas

Loan Type	Down Payment	Monthly P&I	Monthly MI	10-Year Total Cost
FHA (3.5% down, lifetime MIP)	$12,250	$2,253	$157	$305,250
Conventional 97 (3% down, PMI cancels at year 8)	$10,500	$2,225	$200 → $0	$291,300
VA (eligible, 0% down)	$0	$2,348	$0	$281,760

FHA vs Conventional vs VA vs USDA (May 2026)

Quick Answer: Which loan type fits you?

FHA MIP gotcha — lasts LIFE of loan if <10% down

Mortgage Loan Type Comparison Matrix

10-year cost comparison: $350K home, 3.5% down (FHA-eligible scenario)

Which loan type should you choose?

When to refinance from FHA to conventional

Track your credit score during the FHA-to-conventional refi window

Frequently Asked Questions