FHA vs. Conventional 3% Down: Which Deal Actually Costs Less at a 660 Credit Score?
October 21, 2026
At a 660 credit score, the choice between FHA and a conventional loan with 3% down is not as simple as “lower down payment wins.” FHA requires 3.5% down, while eligible conventional options may allow 3%. But the monthly mortgage insurance, upfront costs, rate, and how long you keep the loan can change which option costs less.
Let’s compare the numbers on a $250,000 Ohio home, then look at how down payment assistance and your plans for the home could tip the scales.
First, the basic difference
FHA: Minimum down payment is generally 3.5% for borrowers who meet FHA requirements. FHA also charges an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). For the example below, the FHA annual MIP rate is 0.55%. With 3.5% down, the starting loan-to-value ratio is above 90%, so annual MIP generally lasts for the loan term.
Conventional: Eligible programs such as HomeReady, Home Possible, and other 97% loan-to-value options may allow 3% down. Borrowers who put down less than 20% generally pay private mortgage insurance (PMI). Unlike FHA MIP in this example, conventional PMI can generally be canceled when the loan balance reaches 80% of the home’s original value, subject to requirements.
A 660 score is a useful starting point for comparison, not an approval guarantee. Program rules, automated underwriting results, income, debts, property type, and lender requirements all matter. Freddie Mac’s Home Possible information, for example, outlines program-specific eligibility. In some manually underwritten purchase cases, it lists a 660 minimum indicator score; other requirements still apply.
A $250,000 Ohio example
Here is a simplified comparison for a 30-year fixed-rate loan. To make the payment comparison easier to follow, I’ll use the same illustrative 7.40% rate for both loans. That is not a quote or a prediction of the rate a borrower with a 660 score would receive.
| FHA, 3.5% down | Conventional, 3% down | |
|---|---|---|
| Purchase price | $250,000 | $250,000 |
| Down payment | $8,750 | $7,500 |
| Base loan amount | $241,250 | $242,500 |
| Upfront mortgage insurance | $4,222 UFMIP | No FHA-style upfront MIP |
| Loan amount if FHA UFMIP is financed | About $245,472 | $242,500 |
| Estimated monthly principal and interest at 7.40% | About $1,700 | About $1,679 |
| Monthly mortgage insurance | About $111 initially | Depends on the PMI quote |
The FHA upfront premium is 1.75% of the base loan: $241,250 × 1.75% = about $4,222. Many borrowers finance this premium into the loan. That avoids paying it all at closing, but it increases the loan balance and the interest paid over time.
The FHA estimate for monthly MIP starts at about $111 ($241,250 × 0.55% ÷ 12). Actual MIP is calculated under FHA rules and decreases as the loan balance declines.
Here’s the monthly crossover in this simplified example: FHA’s principal-and-interest payment is about $21 higher, and its starting MIP is about $111. So conventional PMI would need to be roughly $132 per month or more for FHA’s initial principal, interest, and mortgage-insurance payment to come out lower: assuming the same rate and excluding taxes, homeowners insurance, closing costs, and other fees.
That is a comparison point, not a PMI quote. Conventional PMI depends on the borrower’s profile, loan details, and insurer. At 660, it is especially important to compare actual written estimates rather than assume PMI will be inexpensive, or expensive.
Why conventional can win over time
For many conventional loans covered by federal PMI rules, borrowers can request cancellation when the principal balance is scheduled to reach 80% of the home’s original value, or earlier if extra payments bring it there and the servicer’s requirements are met. PMI generally must automatically terminate at 78% of original value when the borrower is current. The Consumer Financial Protection Bureau’s PMI guide explains the rules and qualifications.
That creates a meaningful long-term difference: conventional PMI may go away, while FHA annual MIP on a loan with this down payment generally lasts for the loan term. A future refinance might change the picture, but it is not guaranteed; refinancing depends on future rates, equity, eligibility, and closing costs.
When FHA may be the better deal
FHA may still be the stronger option if its actual rate and monthly mortgage-insurance cost are more favorable for your situation, or if FHA’s underwriting guidelines fit your application better. A buyer whose credit profile, debts, or other circumstances make conventional approval or pricing less favorable should compare both paths rather than rule FHA out based on the upfront premium.
The FHA down payment is also $1,250 higher in this example than the conventional down payment. That is worth considering if cash reserves are tight. On the other hand, FHA may be a more workable route for some buyers, and getting the right loan is about more than winning a spreadsheet contest by one line.
Ohio down payment assistance can change the cash-to-close math
Eligible buyers may be able to use the Ohio Housing Finance Agency’s (OHFA) Down Payment Assistance program. OHFA lists assistance of 3% for conventional loans and 3.5% for FHA, VA, and USDA loans. It may be applied to the down payment, closing costs, or other pre-closing expenses. OHFA says the assistance is forgiven after seven years; if you sell within that period, it must be repaid. Income, purchase-price, credit-score, debt-to-income, and other program rules apply. Review the current details on OHFA’s Down Payment Assistance page.
On a $250,000 purchase, 3% is $7,500 and 3.5% is $8,750-the exact minimum down-payment amounts in our comparison. That can make assistance a major help with upfront cash, but it does not automatically cover every closing expense or make one loan cheaper overall. The program’s rate and terms matter, too. Ask for the full estimate, including the assistance, fees, monthly mortgage insurance, and any repayment conditions.
For more on what goes into the amount you bring to closing, see our guide to understanding cash to close.
A note on rates, and the real crossover
Freddie Mac reported national averages of 7.40% for a 30-year fixed mortgage and 6.71% for a 15-year fixed mortgage for the week ending October 15, 2026. Those figures are context, not a quote for a 660-score borrower putting 3% or 3.5% down. The rate offered for your specific loan can differ, and even a small difference between FHA and conventional rates may change the monthly crossover.
To find out which deal actually costs less, compare official estimates for both programs using the same purchase price and loan term. Look at:
- Total cash needed at closing, including down payment and assistance
- Interest rate, points, lender fees, and APR
- Principal and interest plus monthly MIP or PMI
- How long mortgage insurance is expected to last
- Your expected time in the home and plans to make extra payments
If you are a realtor helping a buyer around Columbus or elsewhere in Ohio, a side-by-side estimate can help keep the financing conversation practical. It also gives buyers a clearer view of the tradeoffs before they shape an offer.
Homeownership can offer the chance to build equity over time, make a place your own, and create more stability than moving from rental to rental. Those benefits are not automatic (maintenance, taxes, insurance, and changing home values are part of the picture) but they are worth weighing alongside the loan costs.
So, which one costs less at 660?
Conventional 3% down may be less expensive over the long run when its rate and PMI are competitive, especially because PMI can generally be canceled under applicable rules. FHA may be the better fit when its actual pricing or underwriting works better for the borrower, or when other factors make conventional less attractive.
At 660, there is no universal winner. Affinity Group Mortgage is an expert at finding the right loan for you, and the best comparison is built around your actual application, not just the down payment percentage. We can review eligible options, including down payment assistance, and help you understand the tradeoffs before you commit.
Have questions about your situation? Call your Affinity Group Mortgage loan officer and we will walk through it with you. Contact your Affinity Group Mortgage Loan officer today.
Steven Scott
Affinity Group Mortgage
steve@agmloans.com
https://www.affinitygroupmortgage.com