No, conventional loans are not insured by the Federal Housing Administration (FHA). They are private loans typically backed by Fannie Mae or Freddie Mac. While FHA loans require government-backed insurance (MIP), conventional loans with less than 20% down require private mortgage insurance (PMI), which can be canceled.
The biggest difference between the two types of loans is that conventional loans are not insured by the government. These types of loans are offered by private lenders such as banks, credit unions, and mortgage companies and often have stricter borrower qualifications compared to government-backed loans.
Conventional Loans—A non-government insured loan that can be used with a second home purchase or an investment. Unlike FHA loans, conventional loans can require a higher credit score (often a minimum of 640), but they can have some major advantages for you.
FHA loans are mortgages insured by the U.S. government's Federal Housing Administration. The insurance allows lenders to offer qualifying terms that are less strict than conventional mortgages. That means that homebuyers (particularly first-time buyers) can more easily qualify for a mortgage.
A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs).
The federal government insures FHA loans issued by private lenders, such as banks. FHA borrowers must pay two types of mortgage insurance premiums (MIPs)—one upfront and the other monthly. Due to FHA insurance, banks are more willing to lend to homebuyers with low credit scores and small down payments.
Neither loan is universally "better"—it depends on your financial situation, but conventional loans are often better for those with good credit needing flexibility (investment properties, canceling insurance), while FHA loans are better for borrowers with lower credit scores or small down payments, as they offer easier qualification but come with stricter rules and perpetual mortgage insurance. Conventional loans can be cheaper long-term if you avoid mortgage insurance by putting 20% down; FHA loans have easier entry but ongoing costs (MIP).
Choose from Several FHA Mortgage Options
Uninsurable property is a home that is not eligible for insurance through the Federal Housing Administration (FHA) because it needs extensive repairs. An uninsurable property is typically ineligible for a mortgage through the FHA.
FHA loans are insured by the U.S. Federal Housing Administration (FHA), which allows lenders to offer them to borrowers who might not qualify for other loan types. FHA loans require you to pay mortgage insurance premiums (MIP).
The majority of conforming conventional loans abide by the mortgage guidelines established by the government-sponsored entities known as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).
Conventional Loan Pros:
Higher Loan Limits: Suits home purchases in expensive markets, including conforming loans and jumbo loans. Flexible Appraisals: Less strict than FHA appraisals, often preferred by sellers. Customizable Terms: Offers fixed or adjustable rates with competitive interest rates.
Credit Score and Debt-to-Income Ratio (DTI)
Conventional loans
Also known as a “conforming” loan, a conventional mortgage loan is any type of home loan that is guaranteed by a private lender or a government-sponsored enterprise like Fannie Mae.
A conventional home loan is one that is not insured or guaranteed by the federal government. This distinguishes it from the three government-backed mortgage types FHA, VA, and USDA.
FHA requires both upfront and annual mortgage insurance for all borrowers, regardless of the amount of down payment.
If your home's value increases or you've paid down a significant portion of your mortgage, refinancing into a new conventional loan can eliminate PMI or remove FHA insurance entirely. Many homeowners with FHA loans choose to refinance once they reach 20% equity, since FHA insurance can't usually be canceled otherwise.
The Federal Housing Administration (FHA) insures several types of mortgage products designed to make homeownership more accessible to a wider range of borrowers. The most common type is the FHA Fixed-Rate Mortgage, which offers a stable interest rate for the life of the loan—typically in 15-year or 30-year terms.
The main cons of FHA loans are mandatory Mortgage Insurance Premiums (MIP) – both upfront and annual, which can last for the life of the loan or 11 years depending on down payment. Other downsides include strict property standards, lower loan limits in high-cost areas, higher long-term costs (especially with good credit), and limitations to primary residences only, which can make them less appealing to sellers and buyers with excellent credit seeking better conventional loan terms.