FHA vs Conventional Loan in Florida: which one fits a Miami purchase

The short version

An FHA loan is a mortgage insured by the Federal Housing Administration, part of HUD. Because the government insures the lender against loss, the lender can accept a smaller down payment and a thinner credit file. You pay for that insurance, up front and monthly.

A conventional loan is not government-insured. If you put down less than 20%, the lender requires private mortgage insurance (PMI) instead, and PMI has a legal off-ramp that FHA insurance does not.

In Miami-Dade the choice is rarely about the interest rate alone. It is about three things: how much cash you have today, whether the building you want will accept an FHA loan at all, and how your offer will read next to the cash buyers who are a real part of this market.

Down payment and credit

The 3.5% figure is HUD’s own: its consumer page says the down payment “can be as low as 3.5% of the purchase price,” and Mortgagee Letter 2010-29 sets the credit-score tiers that unlock it. Lenders may add their own overlays, so treat those as floors, not promises.

Mortgage insurance: MIP vs PMI

This is where the two loans diverge for years.

FHA mortgage insurance premium (MIP)

HUD’s current schedule (Mortgagee Letter 2023-05, effective for loans endorsed on or after March 20, 2023) has two pieces:

• Upfront MIP: 1.75% of the base loan amount on every FHA loan. Most buyers finance it into the loan rather than paying it at closing.
• Annual MIP, charged monthly, for loans with terms over 15 years and a base loan amount at or below the national conforming limit: 0.50% per year at 90% LTV or lower, 0.50% between 90.01% and 95%, and 0.55% above 95%. Above the conforming limit the rates step up to 0.70% and 0.75%.

The duration rule matters more than the rate. At 90% LTV or lower, annual MIP ends after 11 years. Above 90% LTV, which is every buyer who puts down the minimum 3.5%, it runs for the full mortgage term. Every Miami-Dade one-unit FHA loan sits under the conforming threshold, so a minimum-down buyer here should plan on 0.55% per year for as long as they keep the loan.

Private mortgage insurance (PMI)

On a conventional loan with less than 20% down, the lender requires PMI. The premium is set by the insurer based on your credit score and loan-to-value, so we will not quote a number here; your Loan Estimate will. What is fixed is the exit, and it is written into federal law. Per the CFPB:

• You have the right to ask your servicer to cancel PMI when your principal balance is scheduled to fall to 80% of the home’s original value, if the loan is current and you have a good payment history.
• The servicer must automatically terminate PMI when the balance is scheduled to reach 78% of original value.
• Whatever else happens, PMI must end the month after the midpoint of the amortization schedule.

Put simply: PMI is a phase; FHA MIP at 3.5% down is a fixture until you refinance or sell. Over a decade in a Miami home, that difference can outweigh a slightly higher conventional rate.

Loan limits for Miami-Dade, 2026

Both programs cap the loan amount by county.

The FHA figures come from HUD’s 2026 loan-limit announcement and its county lookup; the conventional figures from FHFA’s November 25, 2025 release, which raised the baseline 3.26% to match house-price growth. The practical reading: with 3.5% down, FHA financing in Miami-Dade tops out around a $691,000 purchase price. Above that, you are conventional or jumbo whether you like it or not.

Condo approval: the Miami problem

This is the section that decides the question for many buyers here. FHA will only insure a condo loan in a project it has approved. HUD reviews the association’s insurance coverage, financial condition, title, pending litigation and physical condition, and projects have to recertify to stay on the list.

Miami has thousands of condo buildings, and a large share are not FHA-approved. Common reasons:

• The association never applied, or let its approval lapse.
• Owner-occupancy is too low because many units are rented or held as second homes.
• The budget or reserves do not meet HUD’s financial tests.
• Too many units in the building already carry FHA loans (the concentration limit).
• Open litigation or an insurance gap.

There is a narrower door. Under Single-Unit Approval, an FHA lender can seek approval for one unit in a project that is not on the list, if the project is complete, has at least five dwelling units, is not a manufactured home, and passes a subset of the tests, including FHA concentration, owner-occupancy and financial condition. It is real, but it is slower and not guaranteed.

Conventional lenders review condo projects too, but under Fannie Mae and Freddie Mac guidelines rather than an approved list, and that review is done deal by deal.

Appraisal: value only, or value plus condition

Every financed purchase gets an appraisal to confirm the price supports the loan. An FHA appraisal does something more. HUD’s Handbook 4000.1 requires the appraiser to observe the property against FHA’s minimum property requirements, the familiar test of whether the home is safe, sound and secure, and to report deficiencies. If it fails, the repairs generally have to be completed before FHA will insure the loan.

In practice that means:

• Peeling paint, a roof near the end of its life, missing handrails, a non-functioning system or an unpermitted addition can stall an FHA closing until fixed.
• On an “as-is” Florida contract, the seller has not agreed to make repairs, so the fix has to be negotiated after the appraisal, or the deal dies.
• Older Miami housing stock, and condo buildings with deferred maintenance, are where this bites most.

A conventional appraisal is mainly about value. Condition matters only where it affects marketability or safety in an obvious way. That difference is why listing agents sometimes flinch at FHA offers on older homes.

How your offer reads in a cash-heavy market

Miami-Dade closes a large share of its sales in cash, and sellers here know it. When a seller compares offers, they are pricing risk as much as dollars:

• Cash: no appraisal, no financing contingency, a short close.
• Conventional: an appraisal for value, a financing contingency, a normal timeline.
• FHA: everything above plus a condition-sensitive appraisal, a possible repair negotiation, and a condo-approval question if it is a condo.

None of that makes FHA a bad loan. It means an FHA buyer has to remove doubt in other ways: a fully underwritten pre-approval rather than a pre-qualification, a lender who closes FHA in Miami routinely, an inspection period that is short but real, a realistic closing date, and no request for seller-paid closing costs on a home that has multiple offers. Where a seller is choosing between an FHA offer and a cash offer at the same price, the cash offer usually wins. Where the FHA offer is stronger on price and cleaner on terms, it can and does win.

Choosing

Ask your lender to write both scenarios on the same Loan Estimate format: cash to close, monthly payment with insurance, and the month the insurance ends. The right answer is usually obvious once it is on paper. Then read our closing costs guide so the Loan Estimate itself makes sense.

Figures are the published federal limits and premium schedules in effect for 2026 and are not a loan offer. Lender overlays, rates and insurance premiums vary; confirm every number with a licensed mortgage lender.