Here's something almost nobody tells you when you sit down to buy a house: among the three big loans everyone talks about — conventional, FHA, and VA — there is no "best" one. There's only the best one for you. But that's rarely how it gets pitched. A lot of the time, the loan you get steered into isn't the one that fits your life — it's the one that fits the loan officer's month.
So let's fix that right now. There are exactly four things that actually decide which loan is yours: your down payment, your credit, your mortgage insurance, and whether you've served. Run yourself through those four honestly and the right answer usually falls right out — no matter what the person across the table is nudging you toward.
Conventional: the loan you can eventually make cheaper
Start with conventional, the one people think of as the default. It isn't backed by the government — it's the plain-vanilla loan that gets sold to Fannie Mae or Freddie Mac. And here's the first surprise: you can get in with as little as 3 to 5 percent down. Conventional does not mean 20 percent down. That myth costs renters years.
The tradeoff is credit. Conventional wants a stronger file and rewards a clean credit history more than the other two do. And if you put down less than 20 percent, you'll pay PMI — private mortgage insurance. But here's the key thing that makes conventional powerful: that PMI comes off. Once you've built roughly 20 percent equity in the home, you can drop it and your payment shrinks. That's the whole game. Conventional is the loan you can eventually make cheaper.
FHA: a great door in, a bad place to stay
Now FHA. This is the loan a lot of first-time and bruised-credit buyers actually need, and it's a genuinely good tool. You can get in with 3.5 percent down, and the credit bar is lower — you can often qualify with a score around 580. So if your credit's had a rough chapter, FHA is frequently the door that's open when conventional slams shut.
But here's the part that quietly hurts people. On today's low-down-payment FHA loans, the mortgage insurance — they call it MIP — stays for the life of the loan. It does not fall off at 20 percent equity the way conventional PMI does. So FHA is a fantastic way to get into a home and a bad place to stay forever. The smart play: use it as your entry, then refinance into conventional once your credit and equity catch up, and shed that insurance for good.
VA: the best loan in America — if you qualify
Then there's VA, and I'll say it plainly: for the people who qualify, the VA loan is the best loan in America. If you're an eligible veteran, active-duty service member, or in many cases a surviving spouse, you can buy with zero down. Nothing. And there's no monthly mortgage insurance at all — no PMI, no MIP, ever.
There's just a one-time funding fee — usually a couple percent of the loan, which you roll right in — and it's waived completely if you receive VA disability compensation, and for certain surviving spouses and Purple Heart recipients. No down payment and no monthly insurance eating your payment for years — nothing else on the market touches it. And yet veterans get steered out of this loan constantly, told it's "too hard" or "sellers don't like it," and pushed into something that pays the originator more. If you earned this benefit, use it.
The three loans, side by side
| Factor | Conventional | FHA | VA |
|---|---|---|---|
| Backed by | Fannie Mae / Freddie Mac (not government-insured) | FHA (government-insured) | U.S. Dept. of Veterans Affairs |
| Minimum down payment | 3–5% | 3.5% | 0% |
| Typical credit floor | Higher; rewards clean files | Around 580 | Set by the lender; flexible |
| Mortgage insurance | PMI — drops at ~20% equity | MIP — usually for the life of the loan | None (one-time funding fee only) |
| Best fit | Decent credit, wants lowest long-term cost | Lower credit or tight cash; plan a refi exit | Eligible veterans & service members |
Conventional is the door with a lock you can eventually remove — pay it down and the PMI comes off. FHA is the easy-to-open door that sticks shut behind you: cheap to walk through, but the insurance follows you unless you leave and re-enter through the conventional door. VA is the door reserved for people who earned a key — no toll to cross, no monthly rent on the lock. Same house. The salesperson rarely points you to the cheapest door for you.
The bank-versus-you angle
Here's the whole reason I made this video. A veteran with full entitlement walks in — the correct answer is almost always VA, zero down, no insurance — and instead gets talked into a conventional loan with a down payment, because that file is easier for the shop to push through. Or someone with a solid 700 credit score gets parked in an FHA loan carrying lifetime insurance, when they qualified for conventional PMI they could've dropped in a few years.
I've been in this business since 2007 — before loan officers even needed a license — and here's the uncomfortable truth: the loan officer's incentives and yours are not automatically the same. It's not that everybody's a crook. Most aren't. But the system pays on volume and on what closes easy, and "easiest for the shop" and "cheapest for you over thirty years" are not always the same loan.
The decision framework
So here's how you cut through it. Walk yourself through the four deciders in order:
- Veteran or eligible service member? Start with VA, full stop — and somebody had better give you a very good reason to leave it.
- Credit still healing, or cash tight? FHA is likely your door in — just plan your refinance exit so you're not married to that insurance forever.
- Decent credit and a little more to work with? Conventional probably wins over the long haul, because you can kill the PMI and stop paying it.
- Down payment, credit, mortgage insurance, veteran status — run yourself through those four and the right answer usually falls right out.
See which loan actually fits your numbers
Run the free affordability calculator to see your real numbers before anybody else does the math for you. It's free, and I don't originate loans — so there's nothing being sold on the other end.
Open the Free Calculator →Want the plain-English breakdown of all three loans side by side, with the questions to ask for each? That's exactly what the full loan types guide is for — free, no pitch, no sales guy waiting to call.
Frequently asked questions
Related free resources: Affordability Calculator · loan types guide · all calculators
Educational content only — not financial, mortgage, or legal advice, and not a loan offer or solicitation. Timothy George is the founder of Infinity Financial Mortgage Corporation and has been in the mortgage business since 2007; he is not a currently-licensed loan originator and does not originate loans. FHA loan rules are set in the FHA Single Family Housing Policy Handbook 4000.1 from the U.S. Department of Housing and Urban Development (HUD); conventional loan standards are set by Fannie Mae and Freddie Mac; VA loan benefits and the funding fee are administered by the U.S. Department of Veterans Affairs (va.gov); independent consumer information is available from the Consumer Financial Protection Bureau (CFPB). Down-payment minimums, credit thresholds, mortgage insurance rules, and funding-fee amounts change over time and vary by lender — confirm the current rules and your specific situation with a currently-licensed professional before you act.