TL;DR
- FICO 620–699: FHA wins on payment (Conv PMI is expensive at low credit)
- FICO 700–719: Very close — Conv 97 pulls slightly ahead long-term
- FICO 720+: Conv 97 wins clearly (cheaper PMI + it drops off)
- DTI over 45%: FHA wins regardless of credit (Conv caps at ~50%)
Side-by-side
| Conventional 97 | FHA | |
|---|---|---|
| Down payment | 3% | 3.5% |
| Min FICO | 620 | 580 (500 with 10% down) |
| Max DTI | Up to 50% (AUS) | Up to 56.9% (AUS) |
| Upfront MI | None | 1.75% (financed) |
| Monthly MI | PMI — varies by FICO, drops at 20% equity | 0.55% MIP — life of loan |
| FTHB required? | Yes (or use HomeReady / Home Possible) | No |
| Loan limit (2026) | $806,500 (higher in HCOL) | Varies by county |
| Property condition | Standard appraisal | Stricter FHA appraisal |
The PMI-by-FICO reality check
Conventional PMI is priced on your credit score. FHA MIP isn't. That's the whole game. Approximate monthly PMI rate on a 97% LTV loan:
| FICO | Conv 97 PMI rate | FHA MIP rate |
|---|---|---|
| 620–659 | ~1.55% | 0.55% |
| 660–679 | ~1.20% | 0.55% |
| 680–699 | ~0.90% | 0.55% |
| 700–719 | ~0.62% | 0.55% |
| 720–739 | ~0.50% | 0.55% |
| 740+ | ~0.35% | 0.55% |
You can see the crossover: at ~720 FICO, Conventional PMI drops below FHA MIP— and it keeps getting cheaper. Below 700, FHA is significantly cheaper monthly.
Real payment: $350K purchase
3% / 3.5% down, 6.75% rate, 1.1% tax, 0.4% insurance:
| FICO | Conv 97 PITI | FHA PITI | Winner |
|---|---|---|---|
| 660 | $2,940 | $2,772 | FHA (−$168) |
| 700 | $2,777 | $2,772 | Tie |
| 740 | $2,700 | $2,772 | Conv 97 (−$72) |
| 760 | $2,678 | $2,772 | Conv 97 (−$94) |
The equity endgame nobody mentions
Even at 700 FICO where payments tie, Conventional 97 still wins over 5+ years because PMI is required to drop off at 22% equity. On a $350K house in Phoenix with typical appreciation, that usually hits around year 4–5.
At that point Conv 97 loses its $160/mo PMI entirely. FHA MIP just keeps going. Over years 5–30, that's $50,000+ in cumulative savings.
When each one is objectively right
Pick Conventional 97 if…
- • 700+ FICO (720+ ideal)
- • DTI under 45%
- • Property has any FHA-appraisal risk (older home, condition issues)
- • You plan to own 5+ years (PMI dropoff matters)
- • You want to eventually rent it out
Pick FHA if…
- • FICO under 700
- • DTI 45–56.9%
- • Recent credit event (BK, foreclosure)
- • Non-occupant co-borrower needed
- • 2–4 unit property (Conv 97 is 1-unit only)
The HomeReady / Home Possible upgrade
If your household income is at or below 80% of area median, ask about Fannie Mae HomeReady or Freddie Mac Home Possible. Same 3% down as Conv 97 but with:
- Reduced PMI coverage (cheaper monthly cost)
- No first-time buyer requirement
- Boarder income allowed
- Non-occupant co-borrowers allowed
In Phoenix / Scottsdale for 2026, the 80% AMI threshold is roughly $77,000/year for a 1-person household — surprisingly reachable for many first-time buyers.
Where to go from here
- Full FHA vs Conventional cost breakdown
- Understand which DTI cap you fall under
- Take the Scorecard for your personalized side-by-side.