Product Selection
What is the difference between FHA, VA, and conventional loans?
FHA loans are government-backed with low down-payment and credit-score requirements; VA loans are for eligible veterans and active-duty service members and require no down payment or PMI; conventional loans are not government-insured, require higher credit scores, but allow PMI cancellation once you reach 20% equity.
The full picture
Three loan types dominate the U.S. mortgage market. FHA and VA loans are government-backed — the federal government insures the lender against default. Conventional loans are not government-insured; they follow guidelines set by Fannie Mae and Freddie Mac and are underwritten entirely by private lenders.
FHA loans: lowest credit bar, permanent mortgage insurance
An FHA loan, insured by the Federal Housing Administration, accepts credit scores as low as 580 with 3.5% down (or 500–579 with 10% down). The tradeoff is mortgage insurance: an upfront premium of 1.75% of the loan amount plus an annual MIP that typically runs 0.55%–0.75% of the loan balance. For loans with less than 10% down, MIP lasts for the life of the loan — it doesn't cancel automatically the way conventional PMI does.
VA loans: zero down, no PMI, for eligible veterans
A VA loan, guaranteed by the U.S. Department of Veterans Affairs, is available to eligible veterans, active-duty service members, and certain surviving spouses. Key advantages: no down payment required, no private mortgage insurance, and competitive rates. VA loans do charge a one-time funding fee (1.25%–3.3% of the loan amount, varying by down payment and usage), which can be rolled into the loan. Disabled veterans may be exempt from the funding fee.
Conventional loans: higher bar, PMI cancels at 20% equity
Conventional loans follow Fannie Mae and Freddie Mac guidelines. They typically require a 620+ credit score and down payments starting at 3% (for some programs). Private mortgage insurance is required below 20% down, but under the Homeowners Protection Act, you can request PMI cancellation once you reach 20% equity, and lenders must automatically cancel at 22%. Conventional loans have no upfront insurance premium.
- FHA: 580+ score, 3.5% down, MIP for life of loan (if <10% down).
- VA: No score minimum from VA (most lenders set ~620), 0% down, no PMI, funding fee applies.
- Conventional: 620+ score, 3%+ down, PMI cancellable at 20% equity.
- FHA loan limits vary by county; conventional loans follow conforming limits ($832,750 in most areas for 2026).
Which loan type is right for you?
VA loans are the most favorable economically for eligible borrowers — no down payment and no ongoing PMI. FHA is the accessible path for buyers with limited credit history or smaller savings. Conventional is optimal for borrowers with 620+ credit who want PMI cancellability or are buying above FHA limits. All three require lender qualification — which loan a specific borrower qualifies for depends on their full financial profile.
Sources
- FHA loans require a minimum 3.5% down payment for borrowers with scores of 580 or higher; 10% down for scores between 500–579. — HUD / FHA
- VA home loans are available to eligible veterans, service members, and surviving spouses; they require no down payment and no private mortgage insurance. — VA.gov — Home Loans
- Borrowers with conventional loans who put down less than 20% must pay PMI; they have the right to cancel it once equity reaches 20% under the Homeowners Protection Act. — CFPB
- The 2026 conforming loan limit for one-unit properties is $832,750 in most U.S. counties (up $26,250 from 2025), set annually by the FHFA. — FHFA
Key takeaways
- VA loans are the strongest option for eligible veterans — zero down, no PMI.
- FHA is the most accessible for buyers with lower credit scores or small down payments.
- Conventional is best for borrowers who can hit 620+ credit and want PMI cancellability.
- FHA MIP can last the life of the loan; conventional PMI cancels at 20% equity.
- All three loan types have loan limits — check current county limits before assuming eligibility.
How big FHA and VA lending actually are — FY2025 numbers
◆ ClearValue editorial analysis
Government-backed volume vs. current conventional pricing
The government-backed options carry real structural advantages, and they are not niche. FHA endorsed more than 876,000 loans for home purchases and refinances in fiscal year 2025 — 83% of them for first-time homebuyers — and the program's overall Capital Ratio stood at 11.47%, more than five times the 2.0% minimum Congress requires. Over the same fiscal year, the VA guaranteed more than 500,000 loans for eligible veterans and service members.
Conventional pricing moves weekly and currently sits well above where FHA/VA borrowers lock relative rate risk: Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed rate at 6.65% and the 15-year fixed rate at 5.95% as of August 20, 2026. Conventional loans still make up the bulk of outstanding U.S. mortgage debt, but they set a higher credit-and-down-payment bar than either government-backed program.
Sources: HUD — FHA Fulfilled Core Mission in Fiscal Year 2025 , VA News — VA-Guaranteed Home Loans FY2025 , Freddie Mac — Primary Mortgage Market Survey
Analysis by the ClearValue Editorial Team, applying our published scoring methodology.
This analysis combines cited public data (Federal Reserve, FDIC, CFPB, SBA, IRS, HHS, or similar primary sources, as cited above) with ClearValue's own math and comparison for this question — it is not proprietary ClearValue applicant data. Figures carry an as-of date; rates, limits, and program terms change, so verify current numbers at the linked primary sources before deciding. Educational information, not financial, legal, or tax advice.
The practical rule: take the VA loan if you are eligible — no down payment, no PMI, and VA-capped fees are hard to beat. Choose FHA when your credit is thinner or your down payment is small and you are not VA-eligible, accepting FHA mortgage insurance as the cost of the low bar. Choose conventional when you have strong credit and can reach roughly 20% down, because you can cancel PMI at 20% equity and often price below FHA's all-in cost. Compare the all-in APR — not just the rate — across at least two lenders for whichever path fits.
Published 2026-06-03 · Updated 2026-06-03 · https://clearvaluelending.com/answers/fha-vs-va-vs-conventional-loan