The Homebuyer’s Corner
Should I Use an FHA Loan or a Conventional Loan in California?
Written by Armando Novelo, NMLS 237243, a mortgage loan officer in West Covina with over 20 years of experience helping Southern California buyers.
Should you use an FHA loan or a conventional loan?
The answer depends on your credit, down payment, monthly debts, and how long you plan to keep the loan.
I usually compare both options because one is not automatically better than the other.
FHA can be a great option for buyers who need more flexibility. Conventional can be a better fit for buyers with stronger credit or those who want mortgage insurance that can eventually go away.
The best way to decide is to look at the actual numbers for both.
FHA vs. Conventional: What Is the Difference?
An FHA loan is insured by the Federal Housing Administration.
FHA guidelines allow a minimum down payment of 3.5 percent for borrowers with a qualifying credit score of 580 or higher.
Buyers with scores between 500 and 579 may be eligible with at least 10 percent down.
Keep in mind that individual lenders can have their own requirements on top of FHA's basic guidelines.
FHA can also be more flexible in some situations when it comes to credit history and monthly debt.
If you want to understand how your monthly debts affect what you qualify for, I explain that in my article about how much income you need to qualify for a mortgage in California.
Conventional loans are not insured by FHA. Most conventional loans follow guidelines from Fannie Mae or Freddie Mac.
Conventional loans often work especially well for buyers with stronger credit, but there is no longer one simple credit score where every conventional buyer either qualifies or does not qualify.
The automated systems used to approve many conventional loans look at the full picture, including your credit, income, debts, down payment, and other factors.
Some conventional programs allow as little as 3 percent down.
So don't assume that you need 20 percent down just because you are using a conventional loan.
Mortgage Insurance Is One of the Biggest Differences
This is one of the most important things to compare.
FHA loans have mortgage insurance.
There is an upfront FHA mortgage insurance premium that is generally 1.75 percent of the base loan amount. Most buyers finance that amount into the loan instead of paying it all in cash at closing.
FHA also has an annual mortgage insurance premium that is usually paid as part of the monthly mortgage payment.
The exact amount depends on things such as your loan amount, down payment, and loan term.
Conventional loans work differently.
If you put less than 20 percent down, you may have private mortgage insurance, commonly called PMI. The price of PMI can vary depending on your credit, down payment, loan amount, and other factors.
That is one reason FHA may sometimes look better for one buyer while conventional looks better for another. You have to compare the actual payments.
How Long Does Mortgage Insurance Last?
This is another big difference.
With most newer FHA loans, if you start with less than 10 percent down, the monthly FHA mortgage insurance generally stays for the life of the loan.
If you start with 10 percent down or more, the FHA mortgage insurance generally lasts for 11 years.
That does not mean you are stuck with an FHA loan forever. Some homeowners later refinance into a conventional loan if it makes financial sense.
With conventional loans, PMI can eventually be removed.
For many conventional loans, you can request cancellation when your loan balance reaches 80 percent of the home's original value, as long as you meet the requirements.
In general, PMI must automatically end when the loan is scheduled to reach 78 percent of the home's original value and the loan is current.
That ability to eventually remove PMI can make conventional financing more attractive over the long run.
Do Higher Credit Scores Automatically Mean Conventional Is Better?
No.
This is something I want to make very clear.
There is not one magic credit score where FHA suddenly becomes bad and conventional becomes better.
A higher credit score can make conventional financing more attractive because it may help you receive better pricing and lower PMI.
But credit score is only one part of the decision.
I also look at:
-Your down payment
-Your monthly debts
-Your interest rate on each option
-Mortgage insurance
-Cash needed at closing
-How long you expect to own the home
-Whether you may refinance later
Two buyers with the exact same credit score can still end up with different answers.
If you are worried that your credit is not good enough to buy, you may also want to read this article, Do You Need Perfect Credit to Qualify for a Home Loan in California?
Can You Use Down Payment Assistance With FHA or Conventional?
In many cases, yes!
There are down payment assistance programs that can work with FHA loans and programs that can work with conventional financing.
The requirements depend on the individual program.
If the amount you have saved for a down payment is one of the reasons you are considering FHA, it is worth checking whether you qualify for down payment assistance before deciding. Many times buyers have more options than they realize.
Can You Start With FHA and Refinance Into Conventional Later?
Yes!
Some buyers use FHA because it works better for their situation today and later look at refinancing into a conventional loan. For example, your credit may improve, your home may gain value, or you may pay the loan balance down enough that conventional financing becomes more attractive.
But refinancing is not automatically worth doing just because you can. You have to compare the new interest rate, closing costs, mortgage insurance savings, monthly payment, and how long you plan to keep the new loan.
I explain that decision in more detail in my article about home equity and refinancing.
Which One Is Better for You?
Here is the simplest way I can put it.
FHA may be worth looking at if:
Your credit needs some flexibility
You have a smaller down payment
FHA gives you a better monthly payment
Conventional financing is harder to qualify for with your current situation
Conventional may be worth looking at if:
Your credit gives you favorable conventional pricing
Your PMI is reasonably priced
You want mortgage insurance that can eventually be removed
The overall conventional payment and long-term cost are better
But these are guidelines, not rules.
I would not choose FHA just because someone told you FHA is easier.
And I would not choose conventional just because someone told you conventional is better.
Give me a call, we'll run both.
The Mistake I Don't Want Buyers to Make
The biggest mistake is choosing a loan based on a rule you heard somewhere without comparing the actual numbers.
You may hear:
“FHA is for people with bad credit.”
Not necessarily.
“Conventional always has a better rate.”
Not necessarily.
“You need 20 percent down for conventional.”
You don't.
“Once your score reaches 700, conventional is automatically better.”
Also not true.
Your mortgage is going to be based on your income, your credit, your debts, your down payment, and the pricing available when you are ready to buy.
That is why I like to put the options side by side.
Once you see the payment, cash needed, mortgage insurance, and long-term cost for each option, the answer usually becomes much clearer.
The Bottom Line
FHA and conventional loans can both be good ways to buy a home in California.
FHA may give some buyers more flexibility.
Conventional may give other buyers lower long-term costs and an easier path to getting rid of mortgage insurance.
There is no credit score or down payment amount that automatically tells me which one you should use.
The right answer comes from comparing both options using your actual numbers.
Armando Novelo, NMLS 237243, is a mortgage loan officer at Super Mortgage Bros, powered by Golden Empire Mortgage. He has been helping Southern California buyers and homeowners since 2002. His office is located in West Covina, CA.
For more info, join my email list.
Article Published: June 4, 2026
Date Modified: September 10, 2026
Links
Contact
Armando Novelo
NMLS 237243
Super Mortgage Bros
1900 W. Garvey Ave S. #100
West Covina, CA 91790
Phone: (626) 200-1838
I agree to be contacted by Super Mortgage Bros via call, email and text. To opt out, you can reply “stop” at any time or click the unsubscribe link in the emails. Message and date rates may apply.
Message frequency varies
© 2026 Super Mortgage Bros. Super Mortgage Bros. | All Rights Reserved | Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Golden Empire Mortgage, Inc. ("GEM") [NMLS ID No. 2427] is a California corporation whose principal business office is located at 1200 Discovery Drive, Ste. 300, Bakersfield, California 93309. GEM is a residential mortgage lender and servicer Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. under license no. 413-0360. https://www.nmlsconsumeraccess.org