For most Utah home buyers, the choice comes down to FHA or conventional — two very different loan structures that suit different financial profiles. The wrong choice can cost you tens of thousands over the life of your loan. Here is how to decide.
The Basics: FHA vs Conventional
An FHA loan is insured by the Federal Housing Administration and underwritten by approved lenders. It is designed for buyers with lower credit scores or smaller down payments. A conventional loan is not government-backed — it conforms to Fannie Mae or Freddie Mac guidelines (for conforming loans) or is held by private lenders (for jumbo loans).
Down Payment Requirements
- FHA: 3.5% minimum with a 580+ credit score; 10% minimum with a 500–579 credit score
- Conventional: 3% minimum (some programs) up to 20%; below 20% triggers private mortgage insurance (PMI)
On a $500,000 Utah home — near the median — FHA requires $17,500 down (3.5%), while a conventional 5% down requires $25,000. FHA's lower barrier is attractive for first-time buyers, but the ongoing cost of FHA mortgage insurance often erases that advantage over time.
Credit Score Requirements
- FHA: 500 minimum (with 10% down); 580 minimum (with 3.5% down). Many Utah FHA lenders prefer 620+ in practice.
- Conventional: 620 minimum for most programs; 740+ gets the best rates and lowest PMI costs
If your credit score is below 620, FHA is typically your only conforming option. Between 620 and 680, run both scenarios — the rates and insurance costs may favor FHA. Above 720, conventional almost always wins on total cost.
Mortgage Insurance: The Critical Difference
This is where most buyers make a costly mistake by focusing only on the interest rate.
FHA Mortgage Insurance Premium (MIP):
- Upfront MIP: 1.75% of the loan amount, added to your loan balance at closing
- Annual MIP: 0.55% of the loan balance per year (for most standard terms)
- Key difference: FHA MIP is permanent for the life of the loan if you put down less than 10%. You cannot remove it by building equity — you must refinance into a conventional loan to eliminate it.
Conventional PMI:
- Typically 0.2%–1.5% annually depending on credit score and LTV
- Automatically cancelled when your loan balance reaches 78% of the original purchase price (Homeowners Protection Act)
- Can request cancellation at 80% LTV
On a $480,000 loan, FHA's annual MIP is $2,640/year ($220/month). Even if your conventional PMI is 0.8% ($3,840/year initially), it drops off as you pay down the loan — while FHA MIP continues indefinitely.
Loan Limits in Utah (2026)
Both loan types have limits. For 2026 in most Utah counties:
- FHA loan limit (Salt Lake County): $644,000 for a single-family home
- Conventional conforming limit: $766,550 for most Utah counties
If you are buying above the conforming limit, you are in jumbo territory — where neither FHA nor standard conventional applies. Jumbo loans have their own requirements, typically requiring 20% down and a 700+ credit score.
Property Condition Requirements
FHA has stricter property condition standards. The home must meet HUD minimum property requirements — issues like peeling paint, broken windows, missing handrails, or roof concerns can trigger required repairs before closing. Sellers in competitive Utah markets sometimes reject FHA offers for this reason.
Conventional loans have more flexible property standards, making them easier to use on fixer-uppers or homes with deferred maintenance.
Seller Acceptance in a Competitive Market
In hot Utah markets like Draper, Lehi, and Salt Lake City, sellers sometimes prefer conventional offers — especially if the property has condition issues that could delay an FHA appraisal. If you are competing in multiple-offer situations, a conventional offer may have a practical advantage even if FHA would cost you less.
Which Should You Choose?
- Choose FHA if: Your credit score is below 680, your down payment is under 5%, or you need the most lenient debt-to-income ratio flexibility
- Choose conventional if: Your credit score is 700+, you can put down 10%+, or you plan to stay in the home long enough that eliminating PMI is material to your budget
- Run both scenarios: Get loan estimates for both FHA and conventional and compare the total monthly payment including insurance over a 5–7 year horizon
Ondo RE offers both FHA and conventional loan programs for Utah home buyers. Use our mortgage calculator to compare total monthly payments side by side, or schedule a consultation with our lending team to get a personalized recommendation for your situation.