The Quick Read: The savings come from three places, and none is a fixed number. FHA charges an upfront premium on every loan, and on most low-down-payment loans its annual premium never ends. Conventional private mortgage insurance (PMI) is priced to your credit and down payment, and it drops off. Strong credit and a bigger down payment widen the gap. The condo building itself decides which loan you can use at all.
Key Takeaways
- FHA’s insurance is the same for everyone in a category. Conventional PMI is priced to you personally.
- FHA’s upfront premium is 1.75% of the base loan and is usually financed. Conventional PMI usually has no upfront premium.
- On a 30-year FHA loan above 90% LTV, the annual premium lasts for the whole term. PMI cancels.
- Conventional wins most clearly with strong credit and a larger down payment. FHA can still win with lower credit.
- Your building’s approval status can pick the loan before price does.
What Are You Actually Comparing?
You are comparing two kinds of mortgage insurance. Both protect the lender, not you. Both get added to your monthly cost. They behave very differently over time.
FHA payment estimate
Starting assumptions reflect an example price and the FHA minimum investment. Replace them with your own figures.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA loan quote.
Illustrative starting assumptions: a $350,000 price, the FHA minimum investment as the down payment, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not an FHA loan quote; your rate is set by the lender at lock. FHA mortgage insurance follows HUD’s published schedule for the term, leverage and loan size entered; taxes, insurance and dues are editable estimates; closing costs are not included; county loan limits are not checked here. Licensed in sixteen states for consumer mortgages. Lendmire is not affiliated with or acting on behalf of FHA, HUD, or the federal government.
Mortgage insurance is a policy that pays the lender if a borrower stops paying. LTV, or loan-to-value, is the loan balance divided by the home’s value. A 95% LTV means you put 5% down. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
FHA loans carry mortgage insurance no matter how much you put down. Conventional loans usually require PMI only when you put down less than 20%. Per the federal consumer-finance regulator, PMI is arranged by the lender, provided by private insurers, and usually applies to a refinance with under 20% equity too.
Here is the side-by-side:
| Factor | FHA Insurance | Conventional PMI |
|---|---|---|
| Who sets the price | HUD, by category | Insurer, per borrower |
| Upfront charge | 1.75% of base loan | Usually none |
| Monthly charge | Annual premium, 0.15%-0.75% | Depends on credit and LTV |
| Credit score effect | Same price in a category | Big effect on price |
| How it ends | Term, or 11 years | Cancels at 78%-80% |
The annual FHA range comes from the programs I place files with every week. Where you land inside it depends on term, loan amount and LTV. Program figures are subject to lender guidelines and full file review.
How Does FHA Mortgage Insurance Work on a Condo?
FHA insurance has two parts: an upfront premium and an annual premium collected monthly. The upfront piece is 1.75% of the base loan amount, per HUD Mortgagee Letter 2023-05. Most borrowers finance it. That raises the loan balance, and you pay interest on it for as long as you hold the loan.
The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. The word “annual” misleads people. It is billed monthly, inside your payment.
Duration is where FHA gets expensive. HUD’s Mortgagee Letter 2013-04 changed how long the annual premium lasts. On a 30-year loan above 90% LTV, it lasts for the full term. At or below 90% LTV, it ends after 11 years. The same letter measures LTV before any financed upfront premium, using the lesser of price or appraised value. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Put plainly: with the minimum 3.5% investment, your FHA insurance stays until you sell or refinance. Building equity does not remove it.
That is the most common misunderstanding I hear. Borrowers assume FHA insurance falls off at 20% equity. It does not. The federal law that cancels PMI covers private insurance, not FHA premiums.
How Does Conventional PMI Work on a Condo?
PMI is priced to the individual borrower. The same condo, price and down payment can carry very different PMI costs for two buyers. Credit score and LTV drive most of it. I will not put a PMI number in print, because none is fixed. You get a quote for your file.
Fannie Mae’s Selling Guide requires primary mortgage insurance on a conventional first mortgage above 80% LTV, unless another approved credit enhancement is used. Coverage requirements rise as LTV rises. The price of that coverage is set by the insurer. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
PMI also ends. Under the federal Homeowners Protection Act, servicers must automatically terminate borrower-paid PMI when the balance is first scheduled to reach 78% of original value, if you are current. You can request cancellation at 80%. The CFPB’s examination manual says a condominium is treated as a single-family dwelling under the Act. So the cancellation rights apply to condo loans.
Check your closing PMI disclosure for the scheduled dates. Removing PMI at 78%-80% is a real saving, and it is the biggest source of the gap over FHA.
Where Does the Savings Come From?
Several differences produce the savings. Each one varies by borrower.
1. The upfront premium. An FHA loan adds 1.75% of the base loan to your balance. Conventional PMI usually has no upfront charge unless you choose a single-premium option. Skipping the financed premium means a smaller balance and less interest paid on it.
2. The monthly price. FHA’s annual premium is the same for everyone in a category. PMI is priced to your credit. Strong credit tends to pull PMI well below what FHA charges. Weaker credit pushes it up, sometimes above FHA.
3. How long you pay. This is usually the largest piece. FHA at over 90% LTV charges for the whole term. PMI stops at 78%-80%. The longer you keep the loan, the wider the gap grows.
So how much does conventional save? It depends on four things:
1. The credit score and LTV that set your PMI price.
2. How long each premium would last.
3. Whether you avoid the financed upfront premium.
4. Whether the building qualifies for conventional financing at all.
I do not quote a single dollar saving, because any honest figure depends on a real PMI quote for your file. Ask for both quotes on the same price, down payment and credit profile. Then compare the Loan Estimates side by side.
A Scenario Without Dollar Figures
Picture two buyers purchasing the same condo, each putting 5% down. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Buyer A has strong credit. Her PMI quote comes in low, and she avoids the 1.75% financed premium. Her insurance stops when her balance reaches 78% of the original value. Over a long hold, conventional costs her noticeably less.
Buyer B has a lower score near the FHA floor. His PMI quote is high. FHA’s category pricing treats him the same as any other borrower with his down payment. For him, FHA is likely the cheaper path on monthly cost, even though the premium lasts longer.
Honestly, this is a toss-up for borrowers in the middle. If you plan to sell or refinance within a few years, the permanent nature of FHA insurance matters less. If you plan to stay a decade or more, it matters a great deal.
Why Does the Condo Change the Math?
The building can decide your loan type before price does. Every condo has to clear a project review for the loan program you choose, and the two programs review different things.
For FHA, HUD says the project must be FHA-approved, or the unit must qualify for Single-Unit Approval. Single-Unit Approval is a path for a unit in a project that is not approved. It requires a completed project of at least five units, and the project must meet a subset of the full requirements: FHA insurance concentration, owner-occupancy and financial condition. The lender submits Form HUD-9991 and supporting documents.
For conventional, lenders check the project’s status in Fannie Mae’s Condo Project Manager. Per the Selling Guide’s ineligible projects rules, an “Unavailable” status makes loans in that project ineligible for sale to Fannie Mae. Ineligible characteristics include timeshare or fractional ownership, condo hotels and mandatory third-party amenity memberships. Projects that fail required structural or safety inspections are also out.
Fannie Mae has no consumer lookup. Your lender checks the project for you. FHA, by contrast, runs a public condo search.
A building can fail one side and pass the other. Always check both.
Both programs look at the same kinds of building-level items:
- The association’s budget and reserves
- Insurance coverage
- The mix of owners and renters
- Pending litigation
- The overall financial health of the HOA
Pending association litigation is a problem for conventional eligibility unless it falls under the Selling Guide’s listed minor exceptions. Ask for the HOA documents early in the contract period. The building’s status can sink a deal that the numbers supported.
When Does FHA Still Win on a Condo?
FHA wins in three situations, and it is worth naming them.
Lower credit. The wholesale programs I place FHA loans with start at a 580 decision score, with a 3.5% minimum investment and maximum financing of 96.5%. At lower scores, PMI pricing can climb past FHA’s flat category price.
The building only clears FHA. If the project is Unavailable for conventional but approved for FHA, or qualifies for Single-Unit Approval, FHA may be your only route.
Debt-to-income stretch. The FHA base ratios are 31/43 (housing and total debt against income). Documented compensating factors can reach 40/50 at the top tier, and the automated finding governs most files. Some conventional files cannot reach that far.
The heart of this decision is simple: FHA is built to be forgiving, and you pay for that forgiveness in insurance. See Lendmire’s FHA loan programs for what each one asks of the file.
Edge Cases That Break the General Rule
- The 90% LTV cliff. FHA’s annual-premium duration turns on that one line, per HUD’s actuarial review. Putting down a bit more than 10% can change how long you pay by decades.
- Older FHA loans. Loans with case numbers before June 3, 2013 follow older cancellation rules. Do not apply today’s duration to them.
- High-risk loans. The 80% and 78% PMI rules do not apply to “high-risk” loans as defined under the Act.
- Special programs. Fannie Mae’s HomeReady and HFA Preferred carry different insurance coverage requirements, which can change PMI cost.
- Lender-paid or minimum-coverage options. On some loans, a lender can use minimum coverage in exchange for a pricing adjustment. That is a trade-off, not a free saving.
- Occupancy. FHA is for your principal residence. Financed-insurance rules on the conventional side cover a principal residence or second home. If you are thinking of renting the unit, occupancy decides the leverage. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
What About Refinancing Out of FHA Later?
Moving from an FHA condo loan to conventional is how many homeowners end FHA insurance. The catch: the CFPB says PMI usually applies to a conventional refinance with under 20% equity. So you still pay PMI unless you have at least 20% equity.
The new loan also needs a condo project that passes conventional review. Fannie Mae waives project review for certain refinances, such as high-LTV refinances and its own limited cash-out refinances. Those loans must still pass the general ineligibility rules.
For the equity math on that move, Lendmire’s piece How Much Equity an FHA Condo Needs for a Conventional Cash-Out walks through it.
There is a wrinkle for the FHA loan you already hold. If you have an existing FHA loan, the FHA Streamline refinances it with no appraisal, a limited credit review and a net tangible benefit. The premium continues, so it does not remove insurance.
What Does Your Monthly Budget Look Like?
Both kinds of insurance get added to your monthly payment, per the CFPB. On a condo, they sit next to HOA dues. Lenders count dues in your debt-to-income ratio, so a lower insurance cost can leave more room under the ratio caps.
A permanent FHA premium keeps your payment higher even as equity builds. A PMI payment that disappears gives you a raise later. That difference rarely shows up on the first Loan Estimate, which is why I ask buyers how long they plan to stay.
Decision Checklist
Ask these in order:
1. Is the building FHA-approved or eligible for Single-Unit Approval?
2. Is it eligible for conventional financing?
3. What is your credit score, and what PMI quote does it produce?
4. How much are you putting down, and is it above or below the 90% LTV line?
5. How long do you expect to keep the loan?
6. Can you reach the debt-to-income ratio you need with each one? Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
If the answers split, get both quotes.
Key Terms Defined
Mortgage insurance: A policy that pays the lender if you stop paying. It protects the lender, not you.
PMI: Private mortgage insurance, used on conventional loans, priced to the borrower.
Upfront premium: FHA’s one-time charge of 1.75% of the base loan, usually financed.
Annual premium: FHA’s ongoing insurance charge, collected monthly, between 0.15% and 0.75% of the balance.
LTV: Loan-to-value, the loan balance divided by the home’s value.
Single-Unit Approval: An FHA path to finance one unit in a condo project that is not FHA-approved.
Unavailable status: A Fannie Mae project label that makes loans in the building ineligible for conventional sale.
Frequently Asked Questions
Is conventional always cheaper than FHA on a condo?
No. Conventional tends to cost less with strong credit and a larger down payment. With lower credit, PMI can price above FHA’s flat category premium. The only reliable test is a real quote for each loan on the same price and down payment.
Does FHA mortgage insurance ever come off a condo loan?
Yes, but only in some cases. On a 30-year loan at or below 90% LTV, the annual premium ends after 11 years. Above 90% LTV it lasts for the term. Most borrowers with the minimum investment end it by selling or refinancing.
Can I buy a condo with an FHA loan if the building is not approved?
Sometimes. Single-Unit Approval can allow one unit in an unapproved project, if the project is complete, has at least five units and meets a subset of HUD’s requirements. Your lender submits the documents.
When does PMI end on a conventional condo loan?
It must end automatically when your balance is first scheduled to reach 78% of the original value, if you are current. You can request cancellation at 80%. These rights apply to condos, but not to loans classed as high-risk.
Is the FHA upfront premium paid in cash?
Usually it is financed into the loan, which raises the balance and the interest paid over time. Some borrowers pay it at closing. Either way it is 1.75% of the base loan.
Next Step
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. Call 828-256-2183. Figures depend on lender guidelines and full file review, and nothing here is a commitment to lend.
Condo loans are won or lost at the building level, so ask for the HOA documents before you fall in love with the price.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB: What is private mortgage insurance?
2. HUD Mortgagee Letter 2023-05
3. HUD Mortgagee Letter 2013-04 (hosted by FHFA)
5. CFPB HPA examination manual
7. Fannie Mae Selling Guide B4-2.1-03, Ineligible Projects
8. HUD Actuarial Review (forward mortgages, FY2016)
9. CFPB
This article is part of Lendmire’s FHA loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a Conventional Loan at the Minimum Score or Is FHA Better? · Conventional Loan vs FHA When Credit Is Strong · FHA Loan vs Conventional Loan With a Small Down Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.