With a 640 credit score and a small down payment, a Georgia buyer will usually find that FHA costs less each month than conventional. In our illustration on a $355,000 home at the same interest rate, FHA comes out about $288 a month cheaper. Conventional mortgage insurance can come off around year 12 or 13. FHA's never does at 3.5% down.
The example is one buyer with one house. The price is $355,000, the statewide median sales price for all property types in Georgia REALTORS' September housing indicators. The buyer is choosing between FHA with 3.5% down and conventional with 3% down. Both loans use the same rate: 7.18%, the 30-year fixed average in Freddie Mac's weekly survey as of November 5, 2026.
We kept the rate the same on purpose. The 7.18% figure is a national conventional average. It isn't an FHA rate, and it isn't a quote for someone with a 640 score. Your actual quotes for the two loans may differ, and that can change the result. Holding the rate fixed shows how much of the gap comes from mortgage insurance and loan structure alone.
The price also fits easily under FHA's limits. HUD's 2026 loan limits set a one-unit floor of $541,287 for case numbers assigned on or after January 1, 2026.
Cash to close
HUD says an FHA down payment can be as low as 3.5% of the purchase price. On $355,000 that's $12,425. Conventional at 3% down is $10,650, so FHA needs about $1,775 more up front.
FHA also charges an upfront mortgage insurance premium equal to 1.75% of the loan amount. According to Wells Fargo's FHA guide, it can be added to the loan balance instead of paid at closing, though you then pay interest on it. Here that's about $5,995, which takes the FHA loan from $342,575 to $348,570.
Conventional loans have no upfront mortgage insurance. They do carry loan-level price adjustments, which are risk-based fees Fannie Mae and Freddie Mac set by credit score, down payment and occupancy. Homebuyer.com explains that LLPAs are usually built into the rate but are sometimes charged as a closing cost. FHA doesn't have them. At 640, they're the part of a conventional quote to look at most closely.
Georgia adds one cost of its own. The intangible recording tax is $1.50 for each $500 of the note (or fraction of $500), capped at $25,000 per note. The lender owes it and may pass it on to the borrower, and the Clerk of Superior Court collects it. Because the FHA note includes the financed upfront premium, its tax is slightly higher: about $1,047, compared with $1,033.50 on the conventional note.
Monthly mortgage insurance at a 640 score
This is where the two loans really differ. FHA's annual premium doesn't depend on credit score. HUD cut it from 0.85% to 0.55% for most borrowers on loans endorsed on or after March 20, 2023, according to HUD's announcement. Wells Fargo's table shows 0.55% for loans of $726,200 or less with under 5% down. On the base loan, that's about $157 a month in year one.
Conventional private mortgage insurance is priced by credit score, and a 640 score costs more. In MGIC example rates published by Fairway (updated March 3, 2026), a 650 score with 3% down pays 1.65% a year. A 760 score pays 0.58%. We used 650 because it's the closest published score to 640. On a $344,350 loan, 1.65% works out to about $473 a month. Fairway notes that these figures are examples only and that mortgage insurance rates change daily.
NerdWallet's PMI page gives another view. Citing Urban Institute data, it puts average annual PMI for the 640-659 band at 1.31% of the original loan. It doesn't say what down payment those averages assume. At 1.31%, PMI on this loan would be about $376 a month, and FHA would still come out ahead in year one.
Side by side, year one
These figures cover principal, interest and mortgage insurance only, at the same 7.18% rate on both loans. Property tax, homeowners insurance, HOA dues and escrow aren't included.
| FHA, 3.5% down | Conventional, 3% down | |
|---|---|---|
| Down payment | $12,425 | $10,650 |
| Loan amount | $348,570 (includes $5,995 upfront MIP) | $344,350 |
| Principal and interest | about $2,361 | about $2,333 |
| Mortgage insurance | about $157 (0.55%) | about $473 (1.65%, MGIC 650 example) |
| Monthly total | about $2,518 | about $2,806 |
| Georgia intangible recording tax | about $1,047 | $1,033.50 |
At the start, FHA is about $288 a month cheaper and needs about $1,775 more cash down.
When the mortgage insurance ends
The year-one comparison doesn't hold for the life of the loan. Wells Fargo says that with less than 10% down, FHA mortgage insurance is generally paid for the life of the loan. On this FHA loan, it never goes away unless you refinance or sell.
Conventional PMI does end. Under the rules described by the CFPB, you can ask in writing to cancel it once the balance is scheduled to reach 80% of the home's original value, as long as you're current on payments and have no junior liens. The servicer must end it automatically when the balance is scheduled to reach 78%. It also ends the month after the loan's midpoint, which is year 15 on a 30-year loan.
On this conventional loan, the 80% point comes around month 142, or about 11.8 years. The automatic 78% cutoff comes around month 153, about 12.75 years. After that, conventional costs about $185 a month less than FHA for principal, interest and mortgage insurance. That estimate uses the year-one FHA premium figure, so treat it as an approximation. FHA's principal and interest also stay a little under $30 a month higher for the full term because the upfront premium was financed.
In practice, FHA saves money in the early years and conventional saves money later. Where the two cross depends on how long you keep the loan. If you sell or refinance before PMI would have come off, the later savings never arrive.
What changes at 10% down
Running the same example with $35,500 down (10%) shows how much the down payment matters. Under Wells Fargo's table, FHA's annual premium falls to 0.50% and lasts 11 years instead of the life of the loan. MGIC's 650-score example falls to 0.91%.
| 10% down, same 7.18% rate | FHA | Conventional |
|---|---|---|
| Loan amount | $325,091 (upfront MIP financed) | $319,500 |
| Principal and interest | about $2,202 | about $2,164 |
| Mortgage insurance | about $133 (0.50%) | about $242 (0.91%) |
| Monthly total | about $2,335 | about $2,407 |
| Mortgage insurance ends | after 11 years | around month 117 (78% automatic) |
The monthly gap shrinks to about $71, and conventional PMI reaches its automatic end at about 9.75 years, before FHA's 11 years are up. This is a test of how sensitive the comparison is, not a recommendation. With 10% down, the two loans are close enough that real quotes will decide it.
Where a 640 score actually matters
Fannie Mae removed its 620 minimum score for Desktop Underwriter loans created on or after November 16, 2025, and now relies on DU's own risk assessment, according to a JD Supra summary of the Selling Guide update. A 640 buyer was already above the old minimum, so the change does little for them.
For this buyer, the score mostly affects price rather than approval. It drives conventional PMI and LLPAs. It doesn't change FHA's annual premium. In the MGIC examples, going from 650 to 760 at 3% down would cut PMI on this loan from about $473 a month to about $166. A higher score improves the conventional side of the comparison and leaves FHA's numbers the same.
Georgia Dream and first-time buyers
If this is your first home, look at the Georgia Dream Homeownership Program before choosing a loan. Georgia.gov says it's open to first-time buyers, meaning people who haven't owned a home in the past three years, and to buyers purchasing in certain areas. Liquid assets can't exceed $20,000 or 20% of the price, whichever is greater. You have to put in at least $1,000 of your own money and complete homebuyer counseling. Income and price limits vary by county. The state's page asks only that buyers meet the loan's credit requirements and doesn't list a minimum score, so ask a participating lender how your 640 score fits.
Rules of thumb for a 640 buyer
These assume the rate is the same on both loans, as in the example above.
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With a small down payment and a 640 score, FHA usually has the lower monthly payment at first, because its premium doesn't rise as the score falls.
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If you expect to keep the loan well past year 12 without refinancing, conventional's removable PMI narrows the gap and eventually reverses it.
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With 10% or more down, the two loans are close. Get quotes for both.
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Raising your score lowers conventional PMI and may lower LLPAs. It doesn't change FHA's annual premium.
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Ask lenders for FHA and conventional Loan Estimates on the same day, for the same price and down payment. Compare the rate, points and mortgage insurance lines, not only the monthly total.
Related reading
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What a 20-Point Credit Score Bump Saves on a Georgia Mortgage
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Will FHA's Draft Repair Rules Help Buyers of Older Macon Homes?
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How FHA Minimum Property Requirements Could Change for Older Georgia Homes
