The Conventional Route, and Its Two Named Products
Program and regulatory figures verified September 26, 2026. Details change; confirm your scenario with us.
The conventional path on a MSHDA file is narrower than a conventional loan in general, and narrower in a way that mostly works in your favour.
Two named products
MSHDA's guideline does not simply say conventional. It specifies Fannie Mae HFA Preferred or Freddie Mac Home Possible Advantage, which are the agencies' housing-finance-agency products rather than their standard offerings.
Those products exist because state housing agencies needed conventional loans that work for the borrowers they serve, and they are generally structured with reduced mortgage insurance coverage requirements compared with standard conventional at the same loan-to-value. That is the main reason the conventional route is worth running rather than defaulting to FHA.
Two carriers
MSHDA's guideline states that private mortgage insurance is acceptable only from MGIC or ARCH. On an ordinary conventional loan there are more options; here there are two.
In practice this rarely changes whether a deal works. It does mean the mortgage insurance comparison has to be run on what is actually available on a MSHDA file rather than on the general market, which is a small but real reason to get the comparison from someone who originates these specifically.
3% down against $10,000
A 3% minimum down payment against Michigan's typical values is small. At Detroit's $267,167 or Lansing's $249,666, 3% is well inside the assistance amount, so the MI 10K DPA covers the down payment outright and contributes to closing costs on top.
Which brings the max-financing clause back into view: MSHDA states that max financing is not required, so a borrower with savings can put more down and use less assistance if that structure suits them better. Run the numbers.
Against the FHA route
| Conventional on MSHDA | FHA on MSHDA | |
|---|---|---|
| Minimum down payment | 3% | 3.5% |
| Product | Fannie Mae HFA Preferred or Freddie Mac Home Possible Advantage | FHA |
| Mortgage insurance | Private, MGIC or ARCH only | FHA's own |
| Can mortgage insurance come off later? | Generally yes as equity builds | Depends on FHA's duration rules |
| Appraisal condition standards | Generally lighter | Minimum property requirements |
The row that decides it most often is the fourth one, and it only decides it for people who plan to hold the loan a long time. The row that decides it second most often is the last one, and it decides it for people buying older houses. The FHA route.
Credit
MSHDA's 640 minimum applies on either route. Conventional pricing and mortgage insurance cost are generally more sensitive to credit score than FHA is, so the gap between a 640 file and a 720 file is wider on this route. We do not publish rate or pricing figures, but that sensitivity is worth knowing when you decide which route to run. Credit on a MSHDA file.
The assistance itself is identical
Whichever product sits underneath, the MI 10K DPA is up to $10,000, interest-free, with no monthly payments, and repayable on payoff of the first mortgage, the sale or refinance of the home, or when the home is no longer owner-occupied. The product choice does not touch any of that. The assistance in detail.
Have us run both
The honest answer to which route is better is that it depends on your credit, the house, and how long you plan to keep the loan. We run both against the actual file and show you the comparison. Send us the scenario.
Frequently asked questions
Can you use MSHDA assistance with a conventional loan?
Yes, and MSHDA's guideline names the products: Fannie Mae HFA Preferred or Freddie Mac Home Possible Advantage. Those are the agencies' housing-finance-agency products rather than standard conventional, and they are generally structured with reduced mortgage insurance coverage requirements at the same loan-to-value, which is the main reason the conventional route is worth running.
Which mortgage insurance companies work with MSHDA conventional loans?
MGIC or ARCH only, per MSHDA's lender guideline, and only on the Fannie Mae HFA Preferred or Freddie Mac Home Possible Advantage product. An ordinary conventional loan has more carriers available. It rarely changes whether a deal works, but it does mean the mortgage insurance comparison has to be run on what is actually available on a MSHDA file.
Is conventional or FHA better with MSHDA down payment assistance?
It depends on credit, the house and how long you will hold the loan. Conventional mortgage insurance can generally come off as equity builds, which favours a long hold, and conventional appraisal condition standards are lighter, which favours older housing stock. FHA is less sensitive to credit score. The assistance itself is identical either way, so the decision is entirely about the first mortgage.
How much down payment do you need on a MSHDA conventional loan?
3% minimum, and against Michigan's typical values that is small enough that the $10,000 MI 10K DPA covers it outright in most of the state and contributes to closing costs as well. MSHDA also states that max financing is not required, so a borrower with savings can put more down and draw less assistance if that structure suits them.
Does credit score matter more on the conventional route?
Generally yes. MSHDA's 640 minimum applies on either route, but conventional pricing and mortgage insurance cost are more sensitive to credit score than FHA is, so the difference between a 640 file and a 720 file is wider on the conventional side. We do not publish rate or pricing figures, but that sensitivity is worth factoring in when choosing which route to run.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal or tax advice. MSHDA program terms, income limits and sales price limits are set by the Michigan State Housing Development Authority and change; figures here carry the date we verified them against MSHDA's published documents. Targeted-area status is determined by MSHDA at city and township level and must be confirmed for the specific address. Loans are subject to borrower and property qualification.