Direct answer: Conventional PMI is priced on your credit and
cancels automatically at 78% loan-to-value. FHA charges 1.75% of the loan upfront
plus annual MIP that — with under 10% down — lasts the life of the loan.
Strong credit (roughly 680+) usually wins with conventional; weaker credit or thin
down payments often price better with FHA, with a planned refi out of MIP later.
The same house, both ways ($350,000, 5% down)
| FHA @ 6.25% | Conventional @ 6.5% (PMI 0.6%) | |
|---|---|---|
| Upfront insurance | $5,819 (financed) | $0 |
| Monthly insurance (first month) | $141 | $166 |
| Insurance ends | never (life of loan) | ~11 years (78% LTV) |
| Total insurance if held full term | $38,746 | $22,444 |
| P&I payment | $2,083 | $2,102 |
Notice the shape: FHA's monthly numbers look competitive early (FHA rates often run ~0.25% lower), but the insurance never leaves — the full-term totals aren't close. FHA's honest pitch is access: it prices insurance identically whether your score is 580 or 780, while conventional PMI can double for weaker credit or simply be unavailable.
Decision rules that hold up
- Score ~680+ and 5%+ down: get both quotes, but conventional usually wins — cancellable insurance is worth a slightly higher rate.
- Score below ~660 or 3.5% down: FHA often wins today's payment. Plan the exit: build to 20% equity and refinance to conventional (run it in the refinance calculator) — that's the standard playbook, not a loophole.
- 10%+ down on FHA: the special case where MIP does end (after 11 years) — the comparison tightens; quote both.
- Eligible for VA: skip this whole debate — no monthly insurance at all (VA calculator).
The mistake to avoid
Choosing by rate alone. A 6.25% FHA quote can cost more than a 6.5% conventional once life-of-loan MIP is priced in — and the reverse can be true for weak-credit PMI tiers. Compare rate + insurance + duration in the FHA and conventional calculators side by side, and see PMI explained for the removal rules that make conventional's insurance temporary.