FHA vs conventional in Arizona: which costs less for you?
Last updated October 2026
It depends on your credit score, how much of the price you borrow, and how long you keep the loan. Forward Loans, a Phoenix mortgage broker (NMLS #2006640), prices both on the same file so two Loan Estimates show which one costs less for you.
This guide is for Arizona buyers, often buying for the first time, choosing between the two most common loan types. It’s part of our guide to buying your first house in Arizona.
On this page
- FHA vs conventional at a glance
- Which costs less, FHA or conventional?
- How is mortgage insurance different on each loan?
- When does the mortgage insurance end?
- Which loan lets the seller pay more of your costs?
- What credit score do you need for each?
- How do you compare them on your own file?
- Can you switch from FHA to conventional later?
- FAQ
FHA vs conventional at a glance
| FHA | Conventional | |
|---|---|---|
| Mortgage insurance | An upfront premium plus an annual premium, on every FHA loan | PMI only when you borrow more than 80% of the home’s value |
| What sets the cost | Loan size and loan-to-value, set by HUD | Your credit score and loan-to-value |
| How long it lasts | 11 years if you start at 90% loan-to-value or less. Otherwise, the life of the loan | You can ask to cancel at 80% of the original value. It ends on its own at 78% |
| Credit score | Lower floors. 580 and up for the most financing | No fixed Fannie Mae minimum in its automated underwriting since November 2025. Pricing improves as scores rise |
| Seller credits allowed | Up to 6% of the price | 3% above 90% loan-to-value, 6% from 75.01% to 90%, 9% at 75% or less |
| 2026 one-unit loan limit, Maricopa County | $557,750 | $832,750 |
| Condos | Project on HUD’s FHA condo list, or a single-unit review | The lender reviews the project |
Sources: HUD Handbook 4000.1 and Mortgagee Letter 2023-05, Fannie Mae Selling Guide B3-4.1-02, the Homeowners Protection Act, and FHFA and HUD 2026 loan limits. Checked October 2026.
Which costs less, FHA or conventional?
Neither, by rule. It turns on three things.
- Your credit score. Conventional PMI is priced on your score. FHA’s mortgage insurance premium isn’t. So a higher score tends to favor conventional, and a lower score tends to favor FHA.
- How much of the price you borrow. Above 90% loan-to-value, FHA’s annual premium lasts the life of the loan. Conventional PMI comes off as you build equity.
- How long you keep the loan. If you plan to sell or refinance in a few years, the upfront costs matter more. If you plan to stay, how long the mortgage insurance runs matters more.
The fair way to settle it is two Loan Estimates on the same file.
How is mortgage insurance different on each loan?
Every FHA loan carries mortgage insurance. There’s an upfront premium, usually added to the loan amount, plus an annual premium split into your monthly payment. HUD sets both. Our page on FHA loan requirements in Arizona has the current amounts.
Conventional loans carry private mortgage insurance, or PMI, only when you borrow more than 80% of the home’s value. In the usual setup there’s no upfront premium. The monthly cost is priced on your credit score and loan-to-value. Our page on what a conventional loan requires covers the rest.
When does the mortgage insurance end?
On FHA, it depends on where you start. If your loan begins at 90% of the home’s value or less, the annual premium runs 11 years. Above that, it runs for the life of the loan. The way out after that is a refinance.
On conventional, you can ask your servicer to cancel PMI once your balance reaches 80% of the home’s original value, if your payments are current. It ends on its own when the balance is scheduled to reach 78%. That rule comes from the federal Homeowners Protection Act.
Which loan lets the seller pay more of your costs?
FHA allows seller credits up to 6% of the price. Conventional allows 3% when you borrow more than 90% of the value, 6% from 75.01% to 90%, and 9% at 75% or less. Seller credits can cover closing costs and prepaid items. They can’t go toward your down payment.
If you plan to ask the seller to cover closing costs, check the cap before you write the offer. Our Arizona closing costs guide lists what those credits can cover.
What credit score do you need for each?
FHA’s floors are lower. HUD allows scores of 580 and up for the most financing, and scores from 500 to 579 with a larger down payment.
Conventional changed in late 2025. Fannie Mae dropped its fixed minimum score for loans run through its automated underwriting system in November 2025. Lenders can still set their own minimums, and the price and PMI still improve as your score goes up. More in our guide to the credit score you need to buy in Arizona.
How do you compare them on your own file?
Ask for a Loan Estimate on each, on the same day, for the same home and the same down payment. Then compare these five lines.
- The monthly mortgage insurance, on page 1.
- The loan amount on page 1, since FHA’s upfront premium is usually added to it.
- Section A, Origination Charges, on page 2.
- The “In 5 Years” line on page 3. It shows what you’d pay in the first five years and how much principal you’d pay off.
- The APR on page 3, not only the rate.
A recent file from our team
In October 2026 we closed a conventional purchase in metro Phoenix. Early on, our loan officer priced FHA and conventional side by side on the same file with the same down payment. The monthly cost came out nearly the same. The bigger difference was how long the mortgage insurance would last. The conventional PMI ends on its own at 78% of the original value. The FHA annual premium would have run 11 years.
Real closed loan, October 2026. Conventional fixed-rate purchase. Figures are left out. This is an example, not an offer or a commitment to lend. All loans subject to full underwriting.
Can you switch from FHA to conventional later?
Often, yes, once you have enough equity and your credit fits. A conventional refinance pays off the FHA loan. If the new loan is at 80% of the home’s value or less, there’s no PMI. A refinance has its own costs, so we price it against keeping the FHA loan. More on our refinance page.
FAQ
Is FHA only for first-time buyers?
No. Repeat buyers can use FHA too, as long as the home will be your primary residence.
Is FHA or conventional better for a first-time buyer in Arizona?
Neither, by rule. A lower score often points to FHA. A higher score and more equity often point to conventional. Two Loan Estimates on the same file settle it.
Does the seller care which loan I use?
Sometimes. An FHA appraisal checks HUD’s minimum property standards, so a home that needs repairs may need them fixed before closing. Your agent can tell you how a seller sees each one.
Can I use Arizona down payment assistance with either loan?
Yes. Home Plus and Home in 5 Advantage work with FHA and with the conventional loans built for housing finance agencies. See our Arizona down payment assistance guide.
How much do I need to put down on each?
Each loan has its own minimum. Our Arizona down payment minimums guide covers the current amounts.
Can I drop FHA mortgage insurance without refinancing?
Only if your loan started at 90% loan-to-value or less. Then the annual premium ends after 11 years. Otherwise, a refinance is the way out.
About the author
Michael Creel, Founder, Forward Loans. NMLS #420674.
Michael Creel founded Forward Loans in 2020 after 20-plus years in mortgage, marketing, and real estate. He is based in Phoenix and personally licensed to originate loans in Arizona, California, Colorado, and Texas (NMLS #420674).
His focus is building a brokerage that feels different from a traditional lender. Forward Loans is set up so clients get real options from multiple investors, straight answers from people who know their file, and clear communication through closing. The company serves homebuyers and homeowners across eight states.
Michael leads day-to-day operations and the marketing side of the business. He spends most of his time on strategy, team development, and how Forward shows up publicly through its content, brand, and Realtor partnerships.
About this guide
Last updated October 2026. Program terms, credit requirements, and assistance program limits change, and the figures referenced here should be confirmed with your loan officer or the program’s current materials before you rely on them. This page is education, not a commitment to lend. All loans are subject to full underwriting and property eligibility.
Forward Loans is licensed as both a mortgage broker and a non-delegated correspondent mortgage lender. Depending on the loan program, we either arrange financing through wholesale lenders, or originate and fund the loan ourselves and sell it to an investor that provides the underwriting decision.
Forward Loans, NMLS #2006640 | Michael Creel, NMLS #420674 | Equal Housing Lender | nmlsconsumeraccess.org
11201 N Tatum Blvd, Ste 300, Phoenix, AZ 85028