The short version
If your credit score is roughly 720 or higher and you've got at least 5% down, conventional usually wins. The mortgage insurance is cheaper, and you can get rid of it later without refinancing.
If your score is in the 600s, your debt-to-income is tight, or you've had a credit event in the last few years, FHA often wins, sometimes by a lot. FHA doesn't punish a lower score the way conventional mortgage insurance does.
Between those two? It's close, and it comes down to the actual quotes. That's the whole reason I run both on almost every purchase file I see. Rules of thumb get you in the neighborhood. They don't pick your loan.
What's the real difference between FHA and conventional?
An FHA loan is insured by the Federal Housing Administration. A conventional loan isn't backed by the government at all. Most conventional loans get sold to Fannie Mae or Freddie Mac, and they follow those rules instead. Same lenders, same closing table, same 30-year fixed rate structure. The difference is who's standing behind the loan and how they charge you for the risk.
FHA charges everybody roughly the same for mortgage insurance, no matter their credit. Conventional prices mortgage insurance off your credit score and your down payment. That one design difference drives almost everything else in this comparison.
- Minimum down: 3.5% on FHA (580+ score). 3% on some conventional programs for first-time or moderate-income buyers, 5% for most everyone else.
- Credit floor: FHA allows scores in the 500s on paper, though most lenders want 600-620. Conventional generally starts at 620.
- Debt-to-income: FHA is more forgiving. I've closed FHA files in the high 40s and even 50%-ish with strong compensating factors. Conventional gets tougher above about 45%.
- Occupancy: FHA is primary residence only. Conventional also covers second homes and rentals.
- Loan size: both cap out around the same range in Sonoma County, roughly the mid-$800Ks for a single-family home in 2026. These limits reset every year, so verify the current numbers.
How does mortgage insurance compare on FHA vs conventional?
This is the part that decides it for most buyers, so it's worth slowing down.
FHA has two pieces. There's an upfront premium of 1.75% of the loan, which usually gets rolled into the balance instead of paid in cash. Then there's an annual premium, paid monthly. For most buyers putting less than 5% down, it's currently around 0.55% of the loan per year. And here's the catch: if you put less than 10% down, that monthly premium stays for the life of the loan. The only way out is to refinance into a different loan.
Conventional PMI works differently. There's no upfront charge in the typical setup. The monthly cost swings a lot with your credit score. A 760 borrower with 5% down might pay a fraction of what FHA charges. A 660 borrower with the same down payment can pay more than FHA. And conventional PMI comes off. You can request removal once you hit 80% loan-to-value, and it drops automatically at 78% on the original schedule.
So FHA is flat and permanent. Conventional is credit-sensitive and temporary. Which one's cheaper depends on where you sit.
What does that look like on a real Sonoma County house?
Let's use a $650,000 home in Rohnert Park or southwest Santa Rosa. That's a pretty typical entry-level single-family price around here right now. These are illustrative numbers, not quotes. Rates, premiums and PMI pricing change constantly, so verify for your own scenario.
FHA with 3.5% down: a base loan of $627,250. Add the 1.75% upfront premium and the loan becomes about $638,200. The annual premium at 0.55% runs roughly $290 a month, and it doesn't go away.
Conventional with 5% down: a loan of $617,500, no upfront premium. At a 760 score, PMI might land somewhere around $150 to $200 a month. At a 680 score, it could be $350 or more. That's the swing.
Now layer on the rate. FHA rates are often a bit lower than conventional for mid-range credit, which can close the gap. For a 680 buyer, FHA frequently wins on monthly payment. For a 760 buyer, conventional usually wins on day one and then pulls further ahead once the PMI drops off in a few years.
- Higher credit, 5%+ down: lean conventional.
- Credit in the 600s, or only 3.5% saved: lean FHA.
- Planning to stay 10+ years: permanent FHA insurance matters more, so look hard at conventional.
- Planning to refinance in a couple of years anyway: FHA's lifetime premium matters less.
Are there differences besides cost that should change my pick?
Yes, a few. And they bite in Sonoma County more than people expect.
Condos. An FHA loan on a condo requires the whole complex to be FHA-approved, and plenty of North Bay complexes aren't. Conventional has its own condo review, but it's often an easier path. If you're shopping condos in Santa Rosa or Petaluma, check the complex before you fall in love with the unit.
Property condition. FHA appraisers flag safety items: peeling paint on older homes, missing handrails, a roof near the end of its life. Conventional appraisals are usually less picky. On a 1950s house off Sebastopol Road, that can be the difference between a clean close and a repair negotiation.
Multiple offers. I'll be honest. Some listing agents still see an FHA offer as riskier because of the appraisal. It's not always fair, but it's real. A strong pre-approval and a lender who picks up the phone helps a lot.
Seller credits. FHA allows seller concessions up to 6% of the price. Conventional caps it at 3% when you're putting less than 10% down. If you're negotiating for closing costs, that's real money.
Can I start with FHA and switch to conventional later?
Absolutely, and it's a common plan. Buy with FHA while your credit or savings are still building. Then refinance to conventional once you've got about 20% equity and a better score, and the mortgage insurance is gone.
I've seen this work really well for buyers who bought in 2020 and 2021, when Sonoma County prices jumped. Plenty of them hit 20% equity faster than they ever expected. But don't bank on it. A refinance costs money, and it only makes sense if rates cooperate. If you'd need a lower rate to make the switch worthwhile and rates go up instead, you're keeping that FHA premium. Pick the loan that works today, and treat the refinance as a bonus.