Mortgage guide · 6 min read
FHA vs. conventional vs. VA loans
The three most common home loans, side by side: down payment, credit, mortgage insurance and who each one fits best.
At a glance
| Feature | Conventional | FHA | VA |
|---|---|---|---|
| Who it's for | Borrowers with good credit, or anyone putting 20% down | Buyers with lower credit scores or smaller savings | Eligible veterans, service members and some surviving spouses |
| Minimum down payment | 3% for some first-time buyer programs; 5% is common | 3.5% with a 580+ credit score; 10% with 500–579 | 0% for most eligible borrowers |
| Typical credit score | 620 or higher | 580 or higher for 3.5% down; lenders may require more | No VA minimum; most lenders look for about 620 |
| Mortgage insurance | Private mortgage insurance (PMI) if under 20% down | Upfront premium of 1.75% plus an annual premium, paid monthly | No monthly mortgage insurance |
| Can it be removed? | Yes. Request removal at 80% loan-to-value; it ends automatically at 78% | Only with 10%+ down, after 11 years. Otherwise for the life of the loan, unless you refinance | Nothing to remove |
| Other one-time fee | None | Upfront premium (1.75%), usually added to the loan | VA funding fee, usually added to the loan; waived for many disabled veterans |
| 2026 loan limit (1 unit) | $832,750 in most areas | Varies by county; at least $541,287 | No limit with full entitlement |
| Property rules | Most flexible | Home must meet FHA standards; appraiser checks condition | Home must meet VA standards; appraiser checks condition |
Conventional loans
Conventional loans aren't backed by the government. They follow Fannie Mae and Freddie Mac rules, which is why they're also called conforming loans.
If your credit is strong, conventional is often the cheapest option, because PMI gets cheaper as your credit score and down payment go up, and it goes away once you've built enough equity. With 20% down there's no PMI at all.
FHA loans
FHA loans are insured by the Federal Housing Administration, so lenders can accept lower credit scores and smaller down payments. They're popular with first-time buyers.
The tradeoff is mortgage insurance. You pay an upfront premium of 1.75% of the loan (usually rolled into the balance) plus an annual premium, which for most borrowers is about 0.55% of the loan per year, split into your monthly payments. With less than 10% down, it lasts for the life of the loan, so many FHA borrowers refinance into a conventional loan once they have enough equity.
VA loans
VA loans are guaranteed by the Department of Veterans Affairs for eligible veterans, active-duty service members, and some National Guard and Reserve members and surviving spouses. They usually need no down payment and have no monthly mortgage insurance.
Most borrowers pay a one-time VA funding fee. For a first-time purchase it's 2.15% with less than 5% down, 1.5% with 5% to 9.99% down, and 1.25% with 10% or more down. Later uses with less than 5% down cost 3.3%. Veterans who receive VA disability compensation, and some others, don't pay it. Your Certificate of Eligibility shows whether you're exempt.
Other Michigan options to ask about
USDA loans offer 0% down for homes in eligible rural and small-town areas, which covers a lot of Michigan outside the big metros. Income limits apply.
MSHDA, the Michigan State Housing Development Authority, offers loans and down payment assistance for eligible buyers through participating lenders. Ask your lender whether you qualify.
How to choose
If you're eligible for VA, start there. No down payment and no monthly mortgage insurance are hard to beat.
Otherwise, ask your lender to quote both FHA and conventional with the same down payment. Compare the monthly payment, the cash needed at closing and how long you'll pay mortgage insurance, not just the interest rate. If your credit score is under about 680, FHA often wins. Above that, conventional usually does.
Figures are for 2026 and can change. Loan limits are updated every January, and lenders can set stricter requirements than the minimums shown. A licensed lender can tell you exactly what you qualify for.
This guide is general information, not legal, tax or financial advice. Rules and figures change; confirm details with your agent, lender, title company or attorney. Move Michigan · movemichigan.co