Conventional vs. FHA Loans: Which is Right for You in Arizona?

Published on September 29, 2025

When you start the home loan process, two of the most common options you'll encounter are Conventional loans and FHA loans. Each has its own set of benefits and requirements, and the right choice depends entirely on your financial situation.

Down Payment Requirements

This is one of the biggest differentiators. FHA loans allow for a down payment as low as 3.5%, making them highly attractive to first-time homebuyers with limited savings. Conventional loans typically require a minimum of 3-5%, but to avoid Private Mortgage Insurance (PMI), you need to put down 20%.

Credit Score Minimums

FHA guidelines are more lenient on credit scores, accepting scores as low as 580. Conventional loans are stricter, usually requiring a minimum score of 620, with the best rates reserved for scores of 740 and above.

Mortgage Insurance

Both loan types have mortgage insurance if you put down less than 20%. With an FHA loan, you pay an Upfront Mortgage Insurance Premium (UFMIP) and a monthly premium for the life of the loan (or 11 years if you put down 10% or more). With a Conventional loan, you pay Private Mortgage Insurance (PMI) only until your loan-to-value ratio reaches 78%, at which point it automatically cancels.

Which One to Choose?

If you have a lower credit score or limited funds for a down payment, an FHA loan might be the perfect fit. If you have a strong credit score and more saved for a down payment, a Conventional loan could save you more money in the long run by avoiding FHA's lifelong mortgage insurance.