July 20, 2026 · By Ryan Parker
FHA vs Conventional Loans in South Florida — Which One Saves You More?
If you're shopping for a home in South Florida and trying to figure out which loan type makes sense, you've probably heard the terms FHA and conventional thrown around. Here's the honest breakdown of how they compare — with real numbers for our market.
I run into this question almost daily with buyers in Delray Beach, Boca Raton, Boynton Beach, and beyond. The answer isn't always straightforward, because the right loan depends on your credit score, how much you have saved, and how long you plan to stay in the home. Let me walk you through the difference so you can make an informed decision.
FHA Loan
- Down payment: 3.5% with 580+ credit score
- Credit score: As low as 580 (500 with 10% down)
- Mortgage insurance: 1.75% upfront + 0.55% annual MIP
- MIP duration: For the life of the loan (unless you put 10%+ down, then 11 years)
- DTI limits: Up to 50% with compensating factors
- Loan limit (Palm Beach): Up to $667,000 for a single-family home
Conventional Loan
- Down payment: As low as 3% (fixed-rate)
- Credit score: Minimum 620 typically required
- Mortgage insurance: PMI varies by score and down payment
- PMI duration: Drops off automatically at 78% LTV — you can request removal at 80%
- DTI limits: Typically 43-49% max
- Loan limit: Up to $832,750 (standard conforming)
Let's run the numbers: a $350,000 home in South Florida
To make this concrete, let's compare loans on a typical home in our price range — say a 3-bedroom townhouse in Boynton Beach or a single-family in Delray Beach listed at $350,000. Here's how FHA and conventional stack up at that price point:
| Cost comparison | FHA (3.5% down) | Conventional (5% down) |
|---|---|---|
| Purchase price | $350,000 | $350,000 |
| Down payment | $12,250 | $17,500 |
| Upfront MIP (FHA only) | $5,909 | $0 |
| Monthly payment (est.) | ~$2,350 | ~$2,280 |
| Monthly MI cost | ~$155 (MIP) | ~$115 (PMI) |
| MI drops off? | No (life of loan)* | Yes, at 20% equity |
| Cash needed at closing | ~$18,000 - $22,000 | ~$20,000 - $25,000 |
*FHA MIP lasts the life of the loan if you put down less than 10%. With 10%+ down, it drops after 11 years. Monthly estimates include principal, interest, taxes, and insurance (PITI) at approximate 2026 rates.
Note on that table: These are ballpark estimates to show the difference. Your actual numbers depend on your credit score, the interest rate you lock in, property taxes, and insurance costs — which vary widely across South Florida.
When an FHA loan makes more sense
FHA loans are the better choice when:
Your credit score is between 580 and 650
If your score is in this range, a conventional loan will come with a much higher interest rate and PMI cost — or you might not qualify at all. FHA's government backing means lenders can offer better terms even with less-than-perfect credit. For a buyer with a 620 credit score, the FHA route could save $100-$200 per month compared to conventional.
You have limited cash for a down payment
At 3.5% down on a $350K home, FHA requires $12,250 compared to conventional's 3% minimum of $10,500. But the difference is that FHA allows the entire down payment to come from gift funds or down payment assistance programs. Conventional loans are stricter about how much can be a gift, especially below 5% down.
Your DTI is on the higher side
If you have student loans, a car payment, or credit card debt, FHA allows a debt-to-income ratio up to 50% in many cases. Conventional loans usually cap out around 43-45%. In South Florida's market, where home prices are high and insurance is expensive, that extra DTI wiggle room can make the difference between qualifying and not.
When a conventional loan wins
Your credit score is 680 or higher
Once your score hits 680, conventional loans become very competitive. At 740+, you get the best rates and the lowest PMI costs. A buyer with a 740 score and 5% down on that $350K home might pay $80-$100/month in PMI, while FHA's MIP is fixed at ~$155 regardless of credit. Over 5 years, that difference alone adds up to $3,000-$4,000.
You plan to stay in the home for 5+ years
This is the big one. FHA's MIP never drops off if you put down less than 10%. With a conventional loan, PMI automatically terminates when you reach 78% LTV. On a $350K home with 5% down, you'd hit that in about 5-7 years with normal appreciation. After that, your payment drops by $115/month. Over a 10-year period, that could save you $6,000-$10,000 in mortgage insurance costs.
You're looking at condos or townhouses
FHA has stricter requirements for condo approvals — the building has to be on FHA's approved list, which many South Florida buildings (especially older ones) aren't. Conventional loans are more flexible here. If you're shopping for condos in Boca Raton or Delray Beach, conventional might be your only option for certain buildings.
Can you use Florida down payment assistance with both?
Yes — and this is where a lot of buyers get confused. Florida Housing programs like FL Assist (up to $10,000) and the Hometown Heroes Program (up to $35,000) work with both FHA and conventional loans. Here's the catch:
FHA + Down Payment Assistance
Best if your credit is below 660. The FHA loan gives you flexibility on credit, while the assistance covers most or all of your down payment and closing costs. You could walk into a $300K home with almost nothing out of pocket.
Conventional + Down Payment Assistance
Best if your credit is 680+. You get the lower monthly cost of conventional financing, and the assistance reduces your upfront cash requirement. Over time you save more because PMI drops off.
How your credit score changes the math
Your credit score influences the comparison more than anything else. Here's a quick guide based on where you stand:
Score 580-619: FHA is almost always your best bet
Conventional lenders will either turn you down or offer a rate that doesn't make sense. Focus on FHA and using down payment assistance.
Score 620-659: It's a toss-up
Run the numbers both ways. With a 640 score, conventional might still have higher PMI, but the ability to drop it later could make it worth it if you plan to stay.
Score 660-719: Leaning conventional
Your conventional rate and PMI start to get competitive. Compare the monthly payment side by side.
Score 720+: Conventional almost always wins
Better rates, lower PMI that drops off, more flexible property options. The only exception is if you really need a very low down payment and can use FHA's gift fund flexibility.
Quick answers to common questions
"Can I switch from FHA to conventional later?"
Yes, through refinancing. If you buy with an FHA loan now and your credit improves or you build equity, you can refinance into a conventional loan later to drop MIP. Just factor in refinancing costs (typically 2-5% of the loan amount).
"Does the Hometown Heroes Program work with both?"
Yes. The Hometown Heroes Program (up to $35,000) can be paired with FHA, conventional, and VA loans. The key is working with a lender who is approved to originate Florida Housing loans. Read our full guide to Florida programs for more details.
"Which loan is better for a $250K condo?"
For a condo, check if the building is FHA-approved first. If it isn't, you're going conventional. If it is approved, run the numbers — at $250K the down payment difference is only $1,250 between 3.5% (FHA) and 3% (conventional), so it really comes down to your credit score and how long you plan to stay.
The bottom line
There's no universal right answer. FHA loans are fantastic for buyers with lower credit scores or limited savings — they're more forgiving and more accessible. Conventional loans win on long-term cost for buyers with good credit who plan to stay put.
The smartest thing you can do is have both options quoted by a lender who knows Florida's market and programs. That way you can see the actual numbers side by side — monthly payment, total cost over 5 years, and upfront cash needed — and pick the one that fits your situation.
Austin Edwards at Ocean Blue Lending specializes in comparing FHA and conventional options for South Florida buyers. He can run both scenarios for you in about 20 minutes and show you which one saves more money based on your specific numbers.
Ready to see your numbers?
Get both quotes side by side. A quick call with Austin or Ryan will tell you which loan saves you the most.
Or send us a message and we'll get back to you.
Ryan Parker
Realtor · Coldwell Banker Realty · SL3571861
Ryan Parker is a South Florida real estate agent specializing in helping everyday buyers find affordable homes in Delray Beach, Boca Raton, Boynton Beach, and nearby communities. He works alongside Austin Edwards at Ocean Blue Lending to help buyers get pre-approved and into homes with confidence. He is a RealTrends Verified agent ranked in the Top 1.5% of agents nationwide.
Related resources
Ready to buy? Visit SouthFloridaBuyerGuide.com for affordable neighborhood guides and financing help.