Here's something that drives me crazy about mortgage advice. Somewhere along the way, people decided conventional loans were for "good buyers" and FHA loans were for everyone else. That's nonsense. I've heard buyers say, "I don't want an FHA loan. I want a real mortgage." Let me clear something up. FHA is a real mortgage. And depending on your financial situation, it might be a smart financing strategy. Not because FHA is always better. But because the best loan isn't determined by its reputation. It's determined by what it actually costs you and whether it helps you achieve your goals. 

An FHA loan is a mortgage insured by the Federal Housing Administration and issued by an approved private lender. Because the government provides insurance against certain lender losses, FHA financing can offer more flexible qualifying requirements than some conventional mortgage options. 

Here are some important facts: 
● Qualified borrowers may purchase with as little as 3.5% down. 
● FHA guidelines can accommodate lower credit scores than many conventional programs. 
● FHA loans aren't limited to first-time homebuyers. 
● Eligible gift funds may help cover down payments and closing costs. 
● FHA loans have county-specific borrowing limits and property requirements.

 

For maximum 96.5% financing, FHA generally requires a credit score of at least 580. Scores from 500 through 579 may qualify under FHA policy with at least 10% down, but individual lenders can impose stricter requirements. And having the minimum credit score doesn't guarantee approval. Income, debt, employment, assets, and overall underwriting still matter. 

Imagine you're buying a $300,000 home in Livonia, Brighton, or South Lyon. You have stable employment, some savings, and credit that could use improvement. Should you automatically choose conventional financing? Not without comparing the numbers. Here's a hypothetical example using 30-year fixed-rate mortgages, both at an assumed 6.5% interest rate. 

 

        Purchase Price: $300,000 (FHA) | $300,000 (Conventional)

        Down Payment: $10,500 (3.5%,FHA) | $9,000 (3%, Conventional)

        Base Loan Amount: $289,500 (FHA) | $291,000 (Conventional)

        Upfront FHA Mortgage Insurance: $5,066 (FHA) | $0 (Conventional)

        Total Loan with FHA Upfront Insurance Financed: $294,566 (FHA) | $291,000 (Conventional)

        Monthly Principal & Interest: $1,862 (FHA) | $1,839 (Conventional)

        Illustrative Monthly Mortgage Insurance: $133 (FHA) | $150 (Conventional)

        Estimated P&I + Mortgage Insurance: $1,995 (FHA) | $1,989 (Conventional)

 

Look at that. With these particular assumptions, the estimated monthly payments are almost identical. But the loans are not identical. The FHA example includes a 1.75% upfront mortgage insurance premium financed into the balance, plus an initial annual mortgage insurance rate of 0.55%. The conventional example assumes $150 per month in private mortgage insurance. Actual PMI depends on your credit profile, down payment, coverage, and other factors. The examples exclude property taxes, homeowners insurance, HOA fees, closing costs, and prepaid expenses. They are illustrative—not actual Supreme Lending quotes. Real loan rates and annual percentage rates may differ. The winner can change dramatically when we plug in your actual credit score, interest rates, mortgage insurance premiums, and loan costs. That's why I don't recommend selecting a mortgage based on what somebody at work told you. 

Let's say you've worked hard, built a steady income, and saved enough for a down payment. But your credit history isn't perfect. Maybe you had some financial setbacks a few years ago. Maybe you're carrying more monthly debt than you'd like. A conventional loan might still work. But FHA underwriting may offer another path worth exploring, especially when your credit profile makes conventional financing more expensive or difficult to qualify for. And that matters. You shouldn't have to assume homeownership is impossible just because your financial history isn't flawless. FHA isn't a free pass, though. Borrowers still need to demonstrate their ability to repay the mortgage.

Now let's talk about the part nobody should gloss over. FHA mortgage insurance can be expensive over time. Most FHA purchase loans include two insurance costs. First, there's an upfront mortgage insurance premium, commonly 1.75% of the base loan amount. Second, there's an annual mortgage insurance premium, generally collected through monthly mortgage payments. For a typical 30-year FHA loan with 3.5% down, that ongoing mortgage insurance generally lasts for the entire mortgage term. That's different from conventional private mortgage insurance, which can often be canceled once certain equity and payment requirements are met. FHA loans with an initial loan-to-value ratio of 90% or less generally have an 11-year mortgage insurance period under the applicable rules. Could you refinance an FHA loan into conventional financing later? Potentially, yes—if your financial situation, equity, and market conditions support it. But refinancing isn't guaranteed, and it comes with its own costs. Never build your entire mortgage strategy around assuming you'll refinance later.

 

Here's another misconception. Some buyers believe FHA financing automatically makes their offer less competitive. And some sellers worry about FHA appraisal requirements. The reality is more nuanced. FHA appraisers evaluate market value and consider certain property conditions related to safety, soundness, and security. A home with significant condition problems may require repairs before FHA financing can close. But that doesn't mean every older home is ineligible. Plenty of well-maintained existing homes throughout Southeast Michigan may qualify. And remember: An FHA appraisal is not a substitute for a professional home inspection.

 

Whether you're buying in Novi, Livonia, Plymouth, or Brighton, understanding the property's condition 
matters regardless of the financing you choose. 

Here's how I approach the decision. 

FHA may deserve a serious look if: 
● Your credit profile makes conventional financing challenging or relatively expensive. 
● You have limited down payment savings. 
● You need access to FHA's qualifying flexibility. 
● The full financing comparison supports FHA as a sensible choice. 

Conventional financing may be better if: 
● You have stronger credit and qualify for favorable pricing. 
● You want the potential to cancel private mortgage insurance. 
● You have a larger down payment. 
● You need financing terms or property flexibility that FHA doesn't offer. 

Neither loan is automatically superior. And neither makes you a better or worse homebuyer. 

I'm Jason Miller with Supreme Lending. My goal isn't to push you toward FHA or conventional financing before understanding your situation. It's to help you evaluate the options and see what makes financial sense. We can compare estimated interest rates, monthly payments, mortgage insurance, upfront costs, and long-term trade-offs based on your actual financial circumstances. Because the best mortgage isn't the one with the most impressive name. It's the one that works best for your financial future. 

 

Whether you're buying your first home or making your next move in Southeast Michigan, let's compare your options. 

Visit Jason Miller at Supreme Lending or call me directly at (248) 444-8774.

 
FHA isn't a consolation prize. And conventional isn't automatically the trophy. The real win is 
financing your home intelligently. 

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Jason Miller | Supreme Lending | NMLS #2616621 

Everett Financial, Inc. dba Supreme Lending | NMLS #2129 | Equal Housing Opportunity Lender.