FHA vs. Conventional for South Carolina buyers: which actually costs less?
A side-by-side of monthly payment, mortgage insurance, and long-term cost on a $300k SC home — with the break-even math most lenders skip.
"Should I do FHA or Conventional?" is the most asked question I get from first-time South Carolina buyers. The honest answer: it depends on your credit score and how long you plan to stay. Let's run the math.
The $300,000 SC home, side-by-side
Assumptions: $300,000 purchase price in Dorchester County, 30-year fixed, 680 credit score.
| FHA 3.5% down | Conventional 3% down | Conventional 5% down | |
|---|---|---|---|
| Down payment | $10,500 | $9,000 | $15,000 |
| Loan amount | $295,361* | $291,000 | $285,000 |
| Interest rate | 5.875% | 6.5% | 6.375% |
| Monthly P&I | $1,747 | $1,839 | $1,777 |
| Monthly MI | $213 (MIP, permanent) | $186 (PMI, removable) | $130 (PMI, removable) |
| Property tax + insurance | $350 | $350 | $350 |
| Estimated PITI | $2,310 | $2,375 | $2,257 |
FHA loan amount includes the 1.75% upfront MIP financed into the loan.
The key insight most lenders skip
On day one, FHA looks cheapest because the interest rate is typically lower. But FHA mortgage insurance (MIP) is permanent for the life of the loan at any down payment under 10%. Conventional PMI automatically drops off once you reach 20% equity — typically around years 8–10 on a normal amortization with modest appreciation.
That means a 680-score buyer who stays in the home 8+ years often pays $10,000–$15,000 less total interest & insurance with Conventional, even though FHA's starting payment is a hair lower.
When FHA actually wins
- Credit score under 680 — FHA's rate advantage grows as your score drops; at 620, FHA can be 0.5–0.75% lower.
- You plan to sell or refinance within 5 years — permanent MIP doesn't matter if you're gone before equity crosses 20%.
- Your debt-to-income ratio is tight — FHA allows up to 56.99% DTI with compensating factors; Conventional tops out at 50%.
When Conventional wins
- Credit score ≥ 720 — Conventional's risk-based pricing rewards you heavily.
- You're planning to stay 7+ years — PMI removal saves real money over the long haul.
- You have gift funds and prefer to put down 5% or more — the PMI rate drops sharply past 5% down.
The 15-minute way to decide
We run both scenarios side-by-side in our pricing engine. On a real pre-approval call, I can show you the total 7-year cost, 10-year cost, and break-even point for FHA vs. Conventional on your specific profile. Most people save somewhere between $3,000 and $14,000 over their ownership period just by choosing the right program.
Published by Ken, Founder & Senior Mortgage Advisor. NMLS #2476547.
Ken · Founder & Senior Mortgage Advisor · NMLS #2476547
Summit Lending Group, LLC is an independent mortgage brokerage. Loans originated through our sponsoring broker, C2 Financial Corporation, NMLS #135622. Rates and program availability are subject to lender approval and market conditions. This article is educational and not a commitment to lend. Equal Housing Opportunity.
