FHA vs. conventional vs. VA: which one actually costs less.
The lowest down payment isn't automatically the cheapest loan. Here's how to actually compare FHA, conventional, and VA financing for your specific situation.
If you're eligible for a VA loan, start there
For eligible veterans, active-duty service members, and surviving spouses, VA financing is almost always the least expensive option available: $0 down, no monthly mortgage insurance, and competitive rates regardless of down payment. The only real question for VA-eligible buyers is whether a VA loan fits their specific property and situation — not whether it beats FHA or conventional on cost. Full details: VA Loans Arizona →
FHA vs. conventional: the real trade-off
For buyers without VA eligibility, this is the actual decision. The core trade-off isn't the down payment percentage — it's what happens to mortgage insurance over time.
| FHA | Conventional | |
|---|---|---|
| Minimum down payment | 3.5% (with qualifying credit) | 3% for qualifying first-time buyers |
| Upfront mortgage insurance | 1.75% of loan amount, financed in | None |
| Monthly mortgage insurance | Required for most FHA loans, often for the life of the loan | Required below ~20% equity, but cancels automatically once you reach it |
| Credit flexibility | More forgiving of lower or thinner credit files | Generally wants a stronger credit profile for the best pricing |
| Loan limits | County-specific FHA limit (higher in Maricopa County than the national floor) | 2026 baseline conforming limit of $832,750 statewide in Arizona |
The practical takeaway: FHA is usually the easier approval and the lower closing-cost path for buyers with a thinner or lower credit file. Conventional is usually cheaper over time for buyers with stronger credit, since its mortgage insurance actually goes away once you build enough equity — FHA's often doesn't.
FHA loan limits are set per county and adjust annually — Maricopa County's limit is set higher than the national floor because local home values support it, but exact current figures vary by source and update date. I'll confirm the precise current limit for your target purchase price rather than quote a number that may already be stale.
How I actually help you decide
- Run your credit, income, and target purchase price against both FHA and conventional pricing.
- Calculate the real total cost of each — including mortgage insurance — over the time you actually expect to stay in the home, not just the first year.
- Check what Arizona down payment assistance you qualify for under each loan type, since eligibility can differ.
- Show you both side by side before you commit to either.
Frequently asked questions
Is FHA or conventional better for a first-time buyer?
It depends on your credit score and how long you plan to stay in the home. FHA is often the easier approval with a lower or thinner credit file; conventional is often cheaper long-term for stronger credit, since its mortgage insurance cancels once you reach roughly 20% equity.
Does FHA mortgage insurance ever go away?
For most FHA loans opened with less than 10% down, mortgage insurance lasts for the life of the loan unless you refinance out of FHA entirely. This is one of the biggest long-term cost differences versus conventional financing.