For most Connecticut buyers, the choice comes down to two options. Both are good products. Picking the wrong one can cost you thousands over the years you hold the loan.
Here is how to tell which one fits.
An FHA loan is insured by the Federal Housing Administration. That government backing lets lenders approve borrowers with lower credit scores, smaller down payments, and higher debt loads than they otherwise could.
A conventional loan follows Fannie Mae and Freddie Mac guidelines. No government insurance, so qualifying is stricter — but the long-term cost is often lower for borrowers who can clear the bar.
FHA allows scores as low as 580 with 3.5% down, and down to 500 with 10% down. Conventional generally starts at 620, but pricing does not really improve until you are into the 700s.
The practical rule of thumb: if your score is in the 580 to 680 range, FHA is usually the stronger option. Above roughly 720, conventional usually wins. In between, it is worth running both.
This is the difference that matters most over time, and it is the one buyers understand least.
FHA charges an upfront mortgage insurance premium plus an annual premium. If you put down less than 10%, that annual premium stays for the life of the loan. It does not fall off when you build equity. The only way out is to refinance.
Conventional PMI can be removed once you reach roughly 20% equity, and it cancels automatically at 22%. Over a long hold, that difference can be worth thousands.
So the question is not only which loan is cheaper today. It is how long you plan to keep it. A buyer who expects to refinance in a few years weighs FHA's permanent premium very differently than someone settling in for twenty years.
FHA requires 3.5% down. Conventional can start at 3% for eligible first-time buyers, though 5% is more typical.
On a $400,000 home that is $14,000 versus $12,000 to $20,000. Both allow gift funds. The gap is smaller than most buyers assume, which is why down payment alone rarely decides this.
FHA appraisals apply Minimum Property Requirements on top of value — working utilities, safe electrical, functioning heat, no significant structural problems. Conventional appraisals focus on value.
This matters more than it sounds. An unfinished renovation can stop an FHA file cold even when the home appraises fine. We wrote about that specific trap in why an unfinished bathroom can kill an FHA appraisal. If you are buying a fixer-upper, conventional often means fewer hurdles — or consider a renovation loan built for the job.
FHA is generally more forgiving on DTI than conventional, which matters if you carry student loans or a car payment. If your ratio is tight, FHA may be what makes the file work at all.
Lean FHA if: your score is below 700, savings are limited, you are using gift funds, your DTI is high, or you have a recent credit event.
Lean conventional if: your score is 720 or better, you can put down 5% or more, you want mortgage insurance to eventually disappear, or you are buying a second home or investment property.
Connecticut buyers should also check whether they qualify for CHFA or Time to Own assistance, which pairs with either and can change the math entirely. And in eligible towns, a USDA loan may beat both with zero down.
All options are subject to program guidelines and review by our Approval Team. Nothing here is an approval or an offer of specific terms.
Rules of thumb get you close. Your actual numbers decide it.
We model both side by side for every borrower who qualifies for either — monthly payment, total mortgage insurance cost over your expected hold, and the point where one overtakes the other. Sometimes the answer surprises people.
Yes, and many borrowers do exactly that once they have built equity and improved their credit — specifically to get rid of the permanent mortgage insurance premium.
Yes, and they vary by county. Connecticut limits differ between Fairfield County and the rest of the state, so the answer depends on where you are buying.
No. FHA is open to repeat buyers too, as long as the home will be your primary residence.
They are comparable. FHA can take longer when the appraisal flags a property condition issue that has to be corrected before closing.
Yes, for two-to-four unit properties, as long as you live in one of the units. It is one of the more effective ways to buy a first investment property in Connecticut.
No Social Security number, no hard credit pull.
Get started here, or call (203) 452-9899 and we will run both scenarios with you.
AFC Mortgage Group is a family-owned Connecticut lender, based in Monroe since 1998, with a 4.9-star rating across 461+ Google reviews.
There's one more difference that never shows up in a rate comparison. In a multiple-offer situation, many Connecticut listing agents read a conventional offer as stronger than an FHA offer at the same price. Part of that is FHA's stricter property standards, which can force repairs before closing. Part of it is habit. Whether it's fair or not, it's real, and it can decide whose offer gets picked.
That means a first-time buyer who qualifies for both should think about the house, not just the payment. On a move-in-ready home with several offers, conventional may win the bidding war. On a house that needs work, or for a buyer whose credit fits FHA better, FHA is the right door.
We recently worked with a first-time buyer in Bridgeport who assumed FHA was his only path. After running his numbers both ways, conventional turned out to be the stronger fit for his credit profile and for how the seller would see his offer. The deal closed in 48 days with the appraisal landing at the purchase price. No renegotiation, no last-minute scramble. Not every file is that clean, but the point stands: run both before you write the offer.
Written by Gaetano Ciambriello, Home Finance Advisor at AFC Mortgage Group (NMLS #1783508). AFC Mortgage Group LLC | NMLS #2801 | Monroe, CT | Equal Housing Lender. This article is educational and is not a commitment to lend. All loans are subject to credit approval and program guidelines.
Become homeowners. AFC Mortgage Group will help you navigate the loan process, secure financing, and purchase your dream home.
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