Conventional Loan vs FHA Loan on a Condo: Insurance Cost and End Date

The Quick Read: It depends on your down payment, your credit, and how long you plan to keep the loan. FHA charges two premiums, and on a thirty-year loan above 90% LTV the annual one lasts the whole term. Conventional private mortgage insurance (PMI) can be cancelled and ends by law. The building itself can decide which loan is even possible, so check the condo project before you write an offer. All program details are subject to lender guidelines and full file review.

Side-by-Side

Insurance mechanics are the same on a condo as on a house for each program. What changes on a condo is project eligibility. The table below covers the points that matter most.

The FHA figures reflect what the wholesale programs Lendmire works with place every week. The conventional column stays general on purpose, because PMI cost and eligibility vary by lender, borrower, and building.

When the FHA Loan Is the Better Fit

FHA tends to fit the buyer with a smaller down payment, a thinner credit file, or a debt-to-income ratio that conventional underwriting stretches past its comfort zone. Across the wholesale programs Lendmire places files with, the entry point is a 580 decision score, with financing up to 96.5% and a 3.5% minimum investment. A non-occupant co-borrower is allowed, and seller or interested-party contributions can reach 6% of the price. Ratios start at 31/43 and can reach 40/50 with documented compensating factors, which is where many FHA files get through when conventional would not.

Read the insurance side honestly, though. You pay the 1.75% upfront premium, usually financed into the loan, and then the annual premium. Under HUD Mortgagee Letter 2023-05, the annual premium lasts 11 years when the original LTV is 90.00% or less. Above 90.00%, it lasts for the mortgage term. That 90% line is exact: 10% down lands in the 11-year tier, and 9.9% down does not.

Paying the balance down does not shorten life-of-loan FHA insurance. The usual way off it is refinancing out of the FHA loan, which depends on your equity, your credit, and the building’s eligibility at that time. HUD’s rules govern the details. The Congressional Research Service overview explains the 2013 change that created this structure.

FHA also has a condo-specific route worth knowing. If the building is not on FHA’s approved list, an individual unit in a completed project may still qualify through Single-Unit Approval. HUD announced that option in a 2019 rule release, with caps on how many units can be FHA-insured. The lender completes a project questionnaire (Form HUD-9991) using association information gathered from verifiable sources. Current thresholds sit in HUD’s handbook, and the lender confirms the version in force.

If you want to see how these pieces fit a particular file, Lendmire’s FHA loan programs page lays out the structure.

When the Conventional Loan Is the Better Fit

Conventional usually wins when you have solid credit and can put down enough that PMI is modest or short-lived. The deciding feature is the end date. Under the Homeowners Protection Act, servicers must automatically terminate PMI when the balance is first scheduled to reach 78% of the original value, per the CFPB’s examination procedures. You can request cancellation earlier, at about 80%, if you are current, ask in writing, and have a good payment history. The lender may ask for proof that value has not dropped and that no other liens exist.

Two cautions. First, “original value” generally means the lower of the price or the appraised value, so a hot market does not automatically count in your favor. Second, the 80% and 78% rules have exceptions, including loans treated as high-risk and lender-paid PMI, which works differently. Ask which type you have.

Fannie Mae’s consumer site also notes that both kinds of insurance protect the lender, not you, and that PMI can generally be removed while FHA insurance cannot in the same way. That is a real long-run difference for anyone who expects to hold the loan past the first decade.

PMI cost turns on your down payment, credit, and the lender. The condo shows up in project review, not in a special insurance price.

Conventional has a leverage tradeoff. Putting less down generally means higher PMI, and the building may fail a conventional project review that an FHA single-unit approval would pass. Lenders also check that the project is not flagged unavailable in Fannie Mae’s Condo Project Manager, and loans in unavailable projects are not eligible for sale to Fannie Mae. Criteria such as commercial space, delinquent dues, reserves, litigation, and critical repairs all feed into it.

How the Building Can Decide the Loan

A buyer who is reviewed on credit and income can still be turned down because of the condo project. Neither program is exempt. FHA looks at things like owner-occupancy, how many units are already FHA-insured, units behind on dues, reserves, and commercial space. Conventional project review covers similar ground through its own rules.

The practical advice is simple. Ask your loan officer about the building before you write an offer. If the project fails one program, the other may work. A building with unfunded critical repairs, pending association litigation, or high delinquency can sink either path for reasons that have nothing to do with you.

FHA project approvals also expire and require recertification, so an approval that existed last year may not be current. Have the lender verify status at the time of your contract.

Which Buyer Fits Which Loan

Picture a buyer with around 3.5% down, a credit score in the low 600s, and a plan to stay in the condo for twenty years. FHA may be the only door that opens at that leverage. The cost is premiums that run for the term, so a later refinance into conventional becomes part of the plan.

Now picture a buyer with 20% down and strong credit. Conventional likely avoids mortgage insurance entirely, and FHA’s upfront premium would be a cost with little benefit. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

The middle case is the real decision. Say a buyer has about 10% down and good credit. Both loans are possible. FHA’s annual premium ends after 11 years in that tier, while PMI ends by law at 78% to 80% of original value, often sooner if the buyer pays steadily. Credit drives PMI pricing, so a stronger score tilts toward conventional and a weaker one tilts toward FHA. Whichever loan wins on the monthly budget, compare the end date too.

This is a lean, not a rule. A lender reviews each file in full.

Key Terms Defined

Upfront premium: a one-time FHA insurance charge of 1.75% of the base loan, typically financed into the balance.

Annual premium (MIP): FHA’s ongoing insurance charge, collected monthly, set by term, loan amount, and LTV.

PMI: private mortgage insurance on a conventional loan, priced by credit, down payment, and LTV, and cancellable under federal law.

Original value: the figure used to measure PMI cancellation, generally the lower of price or appraised value.

Single-Unit Approval: an FHA path for one unit in a completed condo project that is not on the approved list.

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Nothing here is a commitment to lend, and every program detail is subject to lender guidelines.

A condo’s insurance bill is only half the story; the other half is whether the building passes, and a good loan officer will ask about the project before the price.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Mortgagee Letter 2023-05

2. Congressional Research Service, FHA-Insured Home Loans: An Overview

3. HUD, FHA condo approval rule announcement

4. CFPB Homeowners Protection Act Examination Procedures

5. Fannie Mae, Private Mortgage Insurance