FHA or conventional? The differences when buying a home in Florida

The differences at a glance

• Minimum down payment. FHA: 3.5% with a 580 credit score or higher. Conventional: 3% if at least one buyer is a first-time buyer, or through programs like HomeReady, which has income limits.
• Credit. FHA: from 580 with 3.5% down, or from 500 with 10% down. Conventional: Fannie Mae sets no minimum in its automated system, but many lenders ask for 620 or more. See What credit score do I need?.
• Mortgage insurance. FHA charges an upfront 1.75% of the loan (it can be added to the loan) plus an annual premium. Conventional loans charge private mortgage insurance (PMI) only with less than 20% down, priced by your credit.
• When does it come off? FHA: after 11 years if you put 10% or more down; with less, it lasts for the life of the loan. Conventional: you can ask to remove it when the balance reaches 80% of the original value, and it ends automatically at 78%.
• 2026 loan limit for a single-family home in Polk and Osceola. FHA: $541,287. Conventional: $832,750.
• Home condition. FHA is stricter.

FHA's annual premium

For a 30-year loan in Polk or Osceola:

• Less than 5% down: 0.55% a year, for the life of the loan.
• 5% to just under 10% down: 0.50% a year, for the life of the loan.
• 10% or more down: 0.50% a year, for 11 years.

Example: a $300,000 home with 3.5% down. The base loan is $289,500. The 1.75% upfront premium is about $5,066, usually added to the loan. The 0.55% annual premium comes to about $133 a month at first and shrinks slowly with the balance.

Many FHA borrowers refinance into a conventional loan later, once they have 20% equity, to stop paying that insurance. Whether it makes sense depends on rates and the home's value at the time.

Conventional PMI

PMI has no fixed price: it depends on your score, your down payment and the lender. With good credit and 5% or more down, it's often cheaper than FHA's insurance. Ask for a quote using your real score.

The home matters too

With FHA, the lender's appraisal checks that the home is safe and in sound condition. If the appraiser finds safety issues or significant damage, they usually have to be fixed before closing. Conventional loans tend to be more flexible with homes that need minor repairs.

The seller can help with closing costs

• FHA: the seller and other interested parties can pay up to 6% of the price toward closing costs and allowed expenses.
• Conventional (Fannie Mae), for a main home: up to 3% with less than 10% down, 6% with 10% to just under 25% down, and 9% with 25% or more down.

This is negotiated in your offer. See closing costs in Florida.

Which one usually fits

• FHA: lower credit, higher debts or little for a down payment.
• Conventional: good credit, 5% or more down, or if you want the insurance to come off later without refinancing.
• With down payment assistance: ask which loan types the program accepts. See down payment assistance.

How to really decide

Ask two or three lenders for a Loan Estimate for FHA and for conventional, with the same details on the same day. Compare the total monthly payment, the cash you need to close and what you'd pay over five years. You can test your numbers in the home buying simulator.

This guide is general information, not a loan approval. Confirm your situation with a licensed lender.