Loan guide
Conventional loans in Michigan
The conventional loan is the 620-and-up workhorse of Michigan mortgages: 3% down is available for first-timers, and its private mortgage insurance cancels at 20% equity — the key cost advantage over FHA for stronger credit.
- Min. down payment
- 3% (first-timer programs), 5% standard
- Min. credit score
- 620 (best pricing 740+)
- Mortgage insurance
- PMI, cancels at 20% equity
- Best for
- Stronger-credit Michigan buyers
How conventional loans work
A conventional loan is any mortgage not backed by a government program (FHA, VA, USDA). Most conform to Fannie Mae and Freddie Mac standards, which sets the "conforming loan limit" — the ceiling below which pricing is best.
First-time-buyer programs allow as little as 3% down for qualified borrowers:
- Conventional 97
- HomeReady
- Home Possible
The PMI advantage over FHA
Conventional loans with less than 20% down carry private mortgage insurance (PMI). Unlike FHA insurance, which often lingers for the life of the loan, PMI doesn't stay forever.
At a 700+ score, running conventional-with-PMI against FHA both ways usually favors conventional.
What's different in Michigan
Michigan has no high-cost counties, so the conforming loan limit here is the national baseline — the same in Ann Arbor as in Flint.
For Michigan buyers with 700+ credit and at least 5% down, conventional is usually the cheaper long-run choice. The cancellable PMI and competitive rates from lenders like Lake Michigan Credit Union and Flagstar make it the default once credit clears the FHA-versus-conventional break-even.
Requirements at a glance
- 620+ credit score (740+ for the best rates)
- 3–5% down for most buyers; 20% to avoid PMI
- Debt-to-income generally under 45%
- Loan amount at or below the conforming limit (or it's a jumbo)
Frequently asked questions
What is a conventional loan?
A mortgage not insured by a government program (FHA, VA, or USDA), usually conforming to Fannie Mae/Freddie Mac rules. It needs a 620+ score, allows as little as 3% down for first-timers, and its PMI cancels at 20% equity — unlike FHA insurance, which often lasts the life of the loan.
FHA vs conventional loan — which is better in Michigan?
Below a 620 score or with limited savings, FHA usually wins on approval and rate. At 700+ credit, conventional usually wins on total cost because its PMI cancels at 20% equity. The right move is to have a Michigan lender quote you both ways and compare the all-in cost, not just the rate.
Can I get a conventional loan with 3% down in Michigan?
Yes — programs like Conventional 97, HomeReady, and Home Possible allow 3% down for qualified first-time or moderate-income buyers. You'll carry PMI until you reach 20% equity, but it's cancellable, and it can pair with MSHDA assistance through an approved lender.
This guide is general information, not a lending decision. Loan limits and program rules change — verify current figures with a licensed Michigan lender and confirm licensing at NMLS Consumer Access. See all Michigan loan types or compare lenders.