A $350,000 home can look very different on paper depending on the loan you choose. When comparing FHA versus conventional down payments, the gap may be only a few thousand dollars upfront, but the right choice can affect your mortgage insurance, monthly payment, homebuying timeline, and long-term costs.
A lower down payment is not automatically the better deal, and a larger one is not always necessary. The best fit depends on your credit profile, available savings, income, debt, and how long you expect to own the home.
FHA versus conventional down payments at a glance
FHA loans are insured by the Federal Housing Administration and are designed to make homeownership more accessible for borrowers who may not have perfect credit or a large cash reserve. With a credit score of 580 or higher, an FHA loan may allow a down payment as low as 3.5%. Borrowers with scores from 500 to 579 may still qualify in some cases, but generally need 10% down.
Conventional loans are not government-insured. They follow guidelines set by Fannie Mae and Freddie Mac, although some lenders also offer other conventional loan options. The standard perception is that conventional financing requires 20% down. That is not true for many primary-home buyers. Eligible buyers may be able to put down as little as 3%, while many others choose 5%, 10%, 15%, or more.
For a $350,000 purchase price, a 3.5% FHA down payment would be $12,250. A 3% conventional down payment would be $10,500, while 5% down would be $17,500. Those figures matter, but they are only the start of the comparison.
FHA down payment requirements
FHA loans can be especially useful for first-time buyers, borrowers rebuilding credit, or buyers who need to preserve savings for moving expenses and home repairs. The 3.5% minimum is based on the home's purchase price, and the funds can often come from personal savings, an approved gift, or an eligible down payment assistance program.
FHA underwriting may be more flexible than conventional underwriting in certain situations, particularly when it comes to credit scores and past credit challenges. However, FHA loans have property standards. The home must meet FHA appraisal and safety requirements, which can be a consideration in competitive markets or when buying an older property that needs work.
Conventional down payment requirements
Conventional financing offers more flexibility in how much you put down. A qualified first-time buyer may be eligible for 3% down, while repeat buyers commonly need at least 5% down for a low-down-payment conventional option. Investment properties and second homes generally require more money down.
Credit is a major factor. A conventional loan can be a strong value for buyers with solid credit because better scores may lead to more favorable pricing and lower private mortgage insurance costs. Conventional financing can also be more accommodating for certain property types and higher loan amounts, subject to program guidelines.
The monthly payment matters as much as the cash upfront
The down payment gets most of the attention because it is the largest immediate expense. But mortgage insurance often determines which loan is more affordable month to month.
FHA borrowers pay two forms of mortgage insurance: an upfront mortgage insurance premium, which is usually financed into the loan amount, and an annual premium paid monthly as part of the mortgage payment. For borrowers putting less than 10% down, FHA annual mortgage insurance generally remains for the life of the loan. It does not simply disappear when the home gains equity.
Conventional loans with less than 20% down typically require private mortgage insurance, or PMI. Unlike FHA mortgage insurance, conventional PMI can usually be requested for removal once you reach 80% loan-to-value based on the original property value, provided you meet the servicer's requirements. It generally terminates automatically at 78% of the original value if your payments are current. A refinance may also remove PMI sooner if the home has appreciated and you qualify.
That distinction can be significant. A buyer with strong credit might pay less for conventional PMI and have a clear path to eliminating it. A buyer whose credit profile makes conventional PMI expensive may find that FHA's upfront structure and qualification flexibility are more practical, even if mortgage insurance lasts longer.
When FHA can make more sense
FHA is often the better starting point when a buyer needs a more forgiving route to approval. It may be worth serious consideration if your credit score is below the range needed for attractive conventional pricing, you have limited savings, or a recent credit event is still affecting your conventional options.
It can also help buyers who want to keep more funds in reserve after closing. Homeownership comes with expenses that do not wait: utility deposits, moving costs, furniture, repairs, and the occasional surprise from an appliance or roof. Draining every available dollar for a larger down payment can leave a new homeowner financially exposed.
That said, FHA is not always the lowest-cost option simply because its minimum down payment is lower. The upfront mortgage insurance premium increases the amount financed, and the ongoing mortgage insurance should be included in any payment comparison.
When conventional can make more sense
Conventional financing is often attractive for buyers with good to excellent credit, stable income, and enough savings to put down at least 3% to 5%. It may offer lower long-term costs, especially when PMI is inexpensive and can be removed as equity grows.
A conventional loan may also be preferable if you are buying a condominium, a property needing repairs, or a home priced above local FHA loan limits. FHA loan limits vary by county, so a purchase that fits within a buyer's budget may still exceed the FHA limit in a higher-cost market.
Buyers who can make a 20% down payment avoid PMI altogether on a conventional loan. Still, putting 20% down should be a financial choice, not a rule followed at the expense of an emergency fund, retirement contributions, or necessary home improvements.
Do not compare down payments without comparing closing costs
Your cash to close includes more than the down payment. It can also include lender charges, appraisal and title services, prepaid property taxes and homeowners insurance, and initial escrow deposits. Depending on the loan and transaction, seller concessions may help cover some allowable closing costs.
FHA allows sellers to contribute up to 6% of the sales price toward a buyer's allowable closing costs and prepaid items. Conventional seller contribution limits vary based on the occupancy type and down payment. For a primary residence with a smaller down payment, the limit is often lower than FHA's, although the exact amount depends on the loan structure.
A higher seller concession does not always mean FHA is the better loan. In a competitive offer situation, a seller may favor a cleaner offer with fewer requested concessions. Your purchase strategy should account for the local market, not just the program rules.
A practical way to choose your down payment
Start with the cash you can contribute without emptying your reserves. Then compare loan estimates using the same purchase price, rate assumptions, and anticipated closing date. Look beyond the down payment to the full monthly payment, including principal, interest, taxes, homeowners insurance, and mortgage insurance.
Next, consider your timeline. If you expect to own the home for only a few years, a lower upfront investment may have more value. If you plan to stay longer, the cost of ongoing FHA mortgage insurance or conventional PMI can carry more weight. If your credit is likely to improve within a year or two, an FHA loan may help you buy now, with refinancing as a possible future option if rates, equity, and qualification support it.
Also ask whether a gift or down payment assistance program changes the equation. Assistance can make a conventional loan more accessible, but each program has eligibility rules, repayment terms, and potential income or location requirements.
The right loan is the one that supports your next move
FHA and conventional loans are both valuable paths to homeownership. FHA can reduce the barriers for buyers who need flexible credit standards and a low down payment. Conventional financing can reward stronger credit, offer lower insurance costs, and provide a way to remove PMI over time.
The clearest answer comes from a side-by-side review of your real numbers, not a generic rule about putting 20% down or choosing the lowest cash requirement. A Better Lending loan officer can help you compare both paths, understand your cash to close, and choose a payment structure that leaves room for life after you get the keys.
