FHA vs Conventional Loans: Which Is Better for First-Time Homebuyers in Michigan?

July 10, 2025 / jpalmortgage /

FHA vs. Conventional Loan: What’s Best for First-Time Buyers in Michigan?

If you’re buying your first home in Michigan, one of the biggest decisions you’ll make is choosing what type of mortgage to get — and for most buyers, it comes down to this:
FHA vs. Conventional.

At JPAL Mortgage, we help first-time buyers explore both options every day. Each loan type has unique pros and cons, and depending on your credit, down payment, and long-term goals, one may fit your needs better than the other.

Questions we hear often:

Q: Is FHA or Conventional better for a first-time homebuyer?
A: It depends on your credit score, down payment, and long-term goals. FHA is more flexible with credit and lower down payments, while Conventional can save you money on mortgage insurance over time.

Q: Can I switch from an FHA to a Conventional loan later?
A: Yes! Many buyers refinance from FHA into a Conventional loan once they build equity and improve credit, to eliminate mortgage insurance.

Let’s explore further…

Quick Comparison: FHA vs. Conventional Loans

Feature

 FHA Loan

 Conventional Loan
Minimum Down Payment 3.5% 3% (for qualified first-time buyers)
 

Credit Score Needed

 580+ (sometimes 500 with 10% down) 620+
 

Mortgage Insurance (PMI)

 Required for life of loan (unless 10% down) Required under 20% down, but can be removed
 

Debt-to-Income Ratio (DTI)

 More flexible Stricter
 

Property Condition

 Must meet stricter standards More flexible
 

Loan Limits

 Lower in some counties Higher in many cases

Why First-Time Buyers Like FHA Loans

FHA (Federal Housing Administration) loans were created to help make homeownership more accessible — especially for buyers with lower credit scores or limited savings.

Pros:

  • Lower credit score requirements

  • Only 3.5% down

  • Flexible DTI ratios

  • Can use gift funds for your entire down payment

Cons:

  • Upfront mortgage insurance fee

  • Monthly mortgage insurance lasts for the life of the loan (unless 10%+ down)

  • Property must meet HUD standards

Why First-Time Buyers Choose Conventional Loans

Conventional loans are not backed by the government, but they’re often preferred by buyers with good credit and a stronger financial profile.

Pros:

  • As little as 3% down for first-time buyers

  • PMI can be requested to remove once you reach 20% equity

  • No upfront mortgage insurance fee

  • Fewer property restrictions

Cons:

  • Higher credit score needed (typically 620+)

  • PMI can be more expensive if your credit isn’t strong

  • Less flexible for higher debt ratios

So, Which One Is Right for Me?

Here’s a quick guide:

You might choose FHA if:

  • Your credit score is under 640

  • You don’t have 20% down saved

  • You have higher monthly debts

  • You want to use gift funds or down payment assistance

You might choose Conventional if:

  • Your credit score is 680+

  • You’re looking to avoid long-term mortgage insurance

  • You plan to stay in the home a long time and build equity

  • You’re eligible for special programs like Freddie Mac BorrowSmart®

Each person’s situation is unique. It’s best to chat with one of our experienced loan officers before making a decision on which product is best. For more resources that can help you prepare for your first home mortgage, check out our First Time Home Buyer Programs in Michigan guide.

Real Talk from JPAL Mortgage

Over half of our clients are first-time homebuyers — and many of them come to us unsure of which loan option to choose. That’s totally normal!

We’ll help you compare:

  • Monthly payments

  • Out-of-pocket costs

  • Future flexibility

  • And what program gets you to your goals the fastest

Want Personalized Advice?

Let us do the heavy lifting. We’ll review your credit, budget, and eligibility — and show you which path makes the most sense for your first home purchase in Michigan.

Book a free meeting or phone call

Or call: 616-465-5725/email: hello@jpalmortgage.com. We would love to speak with you!

JPAL Mortgage is proudly based in Michigan, where its two owners were born and raised! We love this state and have traveled it far and wide. It’s a passion of ours to help make a smooth landing here in Michigan! Learn more about the team at JPAL

JPAL Mortgage – Your best friend in home finance.

All loans require complete underwriting approval, including satisfactory appraisal and clear title work. Interest rates and closing costs are subject to change. NMLS ID #2189752 | Equal Housing Opportunity