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 like Conventional 97, HomeReady, and Home Possible allow as little as 3% down for qualified borrowers.
The advantage over FHA shows up in mortgage insurance. Conventional loans with less than 20% down carry private mortgage insurance (PMI), but PMI cancels automatically at 78% loan-to-value and can be requested at 80% — it doesn't linger for the life of the loan the way FHA insurance often does. 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. Purchases above that limit become jumbo loans, which mostly happens in Ann Arbor, Oakland County, and lakefront markets.
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.