FHA vs VA vs USDA vs Conventional: Which Mortgage Is Right For You?
Government-backed loans can drop your down payment to 0% — but they come with mortgage insurance, property restrictions, and different credit score requirements.
The four main loan programs at a glance
| Program | Min Down | Min Credit | Property Type | Mortgage Insurance |
|---|---|---|---|---|
| Conventional | 3% (5–20% typical) | 620 | Any residential | PMI until 20% equity |
| FHA | 3.5% | 580 (500 with 10% down) | Owner-occupied 1–4 unit | MIP for life of loan if <10% down |
| VA | 0% | No minimum (most lenders set 580–620) | Owner-occupied | None, but funding fee |
| USDA | 0% | 640 typical | Rural areas only | Guarantee fee + annual fee |
Each program has tradeoffs. The right pick depends on credit, cash, location, and whether you've served in the military.
Conventional loans
Issued by private lenders and bundled into mortgage-backed securities for Fannie Mae or Freddie Mac. The standard loan for borrowers with 620+ credit and at least 3% down.
- Conforming loan limit (2026): $806,500 in most counties; up to $1.21M in high-cost areas
- Above the limit: "jumbo loan" — different underwriting
- PMI (Private Mortgage Insurance): required if down payment is below 20%, costs 0.3%–1.5% of loan value annually, automatically drops at 78% LTV (or at 80% LTV on request)
Best for:
- Buyers with 620+ credit and at least 3% saved
- Anyone buying a second home, investment property, or condo (FHA has stricter rules here)
- Borrowers who want to drop mortgage insurance once equity hits 20%
FHA loans
Insured by the Federal Housing Administration. Designed to help first-time and lower-credit buyers.
- 3.5% down with credit score of 580+
- 10% down with credit score of 500–579
- Mortgage Insurance Premium (MIP): Up-front (1.75% of loan amount, financed) + annual (0.55% of loan amount, monthly)
- MIP is permanent if you put less than 10% down — only refinancing into conventional removes it
- Loan limit (2026): $498,257 in most counties; up to $1.15M in high-cost areas
- Property must be owner-occupied as primary residence
- Strict property condition requirements — peeling paint, missing handrails, faulty wiring can all flunk the appraisal
Best for:
- First-time buyers with limited savings
- Borrowers with credit in the 580–660 range
- Buyers who don't mind refinancing in a few years once equity allows
VA loans
Backed by the Department of Veterans Affairs. Available to active-duty service members, veterans, National Guard, Reservists, and qualifying surviving spouses.
- 0% down required (and most lenders allow it)
- No mortgage insurance, ever
- Funding fee of 1.25%–3.30% of loan amount (waived for disabled vets and Purple Heart recipients), financed into the loan
- No minimum credit score at the VA level; most lenders set 580–620
- DTI cap is more flexible (often allows 41% vs conventional 36%, with exceptions to 50%+)
- Streamlined refinance (IRRRL) — refinance to a lower rate with minimal paperwork
- Can be used multiple times in a lifetime (you can have two VA loans simultaneously in some cases)
Best for:
- Any eligible veteran or service member, period — VA is almost always the best deal you'll find
- Vets who lost a home to foreclosure (eligibility restores 2 years after)
USDA loans
Backed by the US Department of Agriculture for rural and some suburban properties. Surprisingly broad — about 97% of US land area qualifies as "rural" by USDA definitions, including the outskirts of many mid-sized cities.
- 0% down required
- 640 minimum credit typical
- Income cap — household income must be at or below 115% of area median
- Guarantee fee of 1.0% up front (financed) + 0.35% annual (monthly)
- Property must be in an eligible area — check eligibility.sc.egov.usda.gov
- Property must be modest — no in-ground pools, no income-producing land features
Best for:
- Buyers in rural or small-town areas
- Lower-income households who can't save a down payment
- First-time buyers willing to drive 30 minutes to a job in a city
How the math compares on a $300,000 home
Assume 7% rate, $300k home price:
| Loan | Down Payment | Loan Amount | Monthly P&I | Monthly MI | Total Monthly |
|---|---|---|---|---|---|
| Conv 20% | $60,000 | $240,000 | $1,597 | $0 | $1,597 |
| Conv 5% | $15,000 | $285,000 | $1,896 | $145 | $2,041 |
| FHA 3.5% | $10,500 | $294,562 (incl MIP) | $1,961 | $135 | $2,096 |
| VA 0% | $0 | $307,500 (incl funding fee) | $2,046 | $0 | $2,046 |
| USDA 0% | $0 | $303,000 (incl guarantee fee) | $2,016 | $88 | $2,104 |
VA is the cheapest 0%-down option. FHA only beats conventional 3% down if your credit is below 680 (where conventional PMI gets expensive).
Loan limits by program (2026)
- Conventional / Conforming: $806,500 most counties; $1,209,750 in high-cost (HI/AK/parts of CA/NY)
- FHA: $498,257 most counties; $1,149,825 in high-cost
- VA: No loan limit for first-time use with full entitlement
- USDA: No loan limit; income limits apply
Which to choose: a decision tree
- Eligible veteran? Use VA. Done.
- Buying in a rural area + income within USDA cap? Use USDA if down payment is the obstacle.
- Credit between 580 and 660? FHA likely beats conventional.
- Credit 680+ and at least 3% saved? Conventional, ideally with 5%+ down to get better PMI rates.
- Credit 740+ and at least 20% saved? Conventional with no PMI, lowest rate, most flexibility.
Loans to be wary of
- Bank-statement loans / no-doc loans — for self-employed, but rates are 1–2% higher
- Hard-money loans — short-term, very high rates, only for flips
- Owner-financed deals — non-standard terms, almost always favor seller
- Lease-to-own — often structured so the buyer loses both rent and option money on default
The four federal programs cover 90%+ of US homebuyers. Stick with them unless you have an unusual situation.