Does 20 percent down eliminate FHA MIP?

No. FHA still charges 1.75 percent UFMIP and 0.50 percent annual MIP regardless of down payment. The annual MIP cancels after 11 years on loans with 10 percent or more down (HUD ML 2013-04). With 20 percent down on a $300k home, FHA total MIP cost is approximately $5,250 UFMIP plus $13,200 over 11 years.

Does conventional require PMI at 20 percent down?

No. PMI is required on conventional only at LTV above 80 percent. At exactly 80 percent LTV (20 percent down) the lender will not require PMI per Fannie Mae and Freddie Mac standards. Some lender overlays may want PMI on certain non-standard property types or borrower profiles.

Why would anyone take FHA with 20 percent down?

Almost no one should. Three narrow cases: 1) The loan amount needs FHA 203(k) renovation financing. 2) Credit profile fails conventional automated underwriting and only FHA manual underwrite clears. 3) Property condition fails URAR appraisal but passes FHA MPR or vice versa. Otherwise conventional at 20 percent down is decisively cheaper.

20% Down: Conventional vs FHA

Conventional with 20% down eliminates PMI entirely. FHA still charges 1.75% UFMIP plus 0.50% annual MIP for 11 years. Conventional is decisively cheaper at 20% down for almost every buyer.

Verdict

Conventional. The exception is narrow: 203(k) renovation, credit profile that only clears FHA manual underwrite, or specific property condition issues.

$300k home at 20% down ($60k cash, $240k loan)

Line	FHA	Conventional
Base loan	$240,000	$240,000
UFMIP	$4,200 (rolled in)	$0
Annual MI	0.50%	None
Monthly MI (year 1)	~$102	$0
MI duration	11 years (HUD ML 2013-04)	None
11-year MI total	~$13,200 + UFMIP	$0
Net conv savings	~$17,400

The narrow FHA exceptions at 20% down

FHA 203(k) renovation. If the property needs $25k+ in structural or system repairs that the conventional appraiser would condition or refuse, FHA 203(k) Standard or Limited finances the purchase plus rehab on a single loan. Conventional HomeStyle is the comparable product.
Self-employed with thin documentation. Conventional via Fannie DU may refuse a borrower whose 2-year self-employment average looks unstable. FHA manual underwrite with compensating factors may clear.
Recent significant derogatory. 2 years from Chapter 7 discharge or 3 years from foreclosure: FHA only. Conventional waits 4 or 7 years respectively.
Property type. Manufactured home or specific condo types may only qualify on FHA.

Rate difference at 20% down

FHA rates are typically 0.10 to 0.30 percentage points lower than conventional at the same FICO. At 20% down with 740+ FICO, conventional sits near par. FHA might price 0.15% lower, but the UFMIP and annual MIP wipe out that rate advantage by year 2. On a 30-year hold the rate advantage is negative once UFMIP is included.

Rate disclaimer

FHA UFMIP and annual MIP rates may change via future HUD Mortgagee Letters. Consult a licensed loan officer.

Sources

HUD Mortgagee Letter 2024-04: HUD ML 2024-04
HUD Mortgagee Letter 2013-04 (MIP duration): HUD mortgagee letters
Fannie Mae Selling Guide B7-1 (PMI eligibility): selling-guide.fanniemae.com

Related: 10% down | FHA 203(k) | Refi out of FHA