A 580 credit score and 3.5% down is enough to buy a home in Michigan. FHA makes homeownership reachable when the conventional bar is out of reach, and the right lender makes the difference between a clean close and a deal that falls apart.
An FHA loan is a mortgage insured by the Federal Housing Administration. Because the government backs the lender against default, lenders can offer lower credit score minimums and smaller down payments than most conventional loans. For first-time buyers and borrowers rebuilding credit, FHA is often the most accessible path to homeownership in Michigan.
FHA requires just 3.5% down with a 580 or higher credit score. On a $300,000 Michigan home, that's $10,500 down instead of $60,000 for a conventional 20% down loan.
FHA accepts credit scores as low as 500. Even if you've had past financial setbacks, bankruptcy, or collections, you may still qualify. Clear2 shops 50+ lenders to find the best FHA fit for your credit profile.
FHA allows debt-to-income ratios up to 57% with compensating factors, giving buyers with student loans, car payments, or other obligations more room to qualify compared to conventional programs.
FHA loan limits are set by county and updated each year. For 2025, most Michigan counties share the standard floor limit. High-cost metro counties in Southeast Michigan hit that same standard ceiling. Below are the limits for the markets Clear2 serves most.
Limits shown are for single-family (1-unit) properties. Multi-unit FHA limits are higher. Limits are set by HUD and subject to annual adjustment.
FHA eligibility requirements are set by the FHA, but individual lenders can layer on their own overlays. As an independent broker, Clear2 shops lenders to find the one with the most flexible guidelines for your situation.
FHA and conventional loans each have their place. Here is how they compare on the factors Michigan homebuyers ask about most.
FHA is not the right loan for everyone. But for the right borrower, it opens doors that other programs close. Here are the three profiles where FHA consistently wins.
If you haven't built up a large savings reserve, FHA's 3.5% down requirement means you can stop renting sooner. Many Michigan first-time buyers pair FHA with local down payment assistance for even lower out-of-pocket costs.
A past bankruptcy, foreclosure, or credit event doesn't automatically disqualify you. FHA has defined waiting periods (2 years post-bankruptcy, 3 years post-foreclosure) and accepts scores as low as 500, making it the most realistic path forward for borrowers working their way back.
With higher DTI tolerance and the ability to use gift funds for the full down payment, FHA is built for buyers who earn steady income but haven't had the ability to save aggressively. It's designed to be accessible.
Every borrower's situation is different. Here are three realistic examples of Michigan homebuyers who used FHA financing through Clear2.
A teacher with a 610 credit score and $14,000 saved wanted to buy a $280,000 home in Macomb County. Conventional lenders quoted high rates due to the credit score. FHA with 3.5% down ($9,800) fit the budget, and Clear2 shopped wholesale lenders to find a rate below what the local bank offered.
A couple in Wayne County had a foreclosure five years prior and a 565 credit score. With 10% down saved from a family gift, they qualified for FHA with a 500-579 credit score tier. Two years post-settlement they were homeowners again, this time with a Clear2-sourced wholesale rate lower than the retail quotes they had received.
A freelance designer in Washtenaw County had a 625 credit score but irregular income that made conventional lenders nervous. FHA's flexible DTI tolerance (up to 57% with compensating factors including strong assets and good rental history) allowed Clear2 to find a lender willing to approve the loan on documented bank deposits and client invoices.
At Clear2, FHA loans aren't a fallback. They're a specialty. Because we're an independent broker with access to 50+ wholesale lenders, we can shop the FHA market the way a big bank cannot, finding you the best combination of rate, lender overlays, and closing timeline for your specific profile.
Our Troy, MI office is your home base. You'll work directly with a loan officer from application to closing, not a call center.
Clear2 Mortgage2600 W Big Beaver Rd, Suite 100Troy, MI 48084(248) 970-0040
Christopher Kas-Marogi is the founder and President of Clear2 Mortgage, with more than $1 billion in funded residential loans. He built Clear2 as an independent broker specifically so Michigan clients could access wholesale rates unavailable at retail banks, including FHA programs with more flexible credit guidelines and lower costs.
Five-star reviews from Clear2 clients on Google.
"Donavin was straightforward and a breeze to work with. Communication was quick and easy. The whole process was seamless and he was available for guidance or questions. I would not hesitate to use Clear2 Mortgage in the future."
"Alex was absolutely amazing from the beginning. He was patient and thorough with all of our questions. He even followed up after the process was finalized to ensure everything was still good. I would recommend him to everyone!"
"The process was seamless and every question I had as a first-time home buyer was answered. My loan officer gave me his professional opinion based on my specific circumstances to personalize my loan."
Can I use gift money for my FHA down payment?
Yes. FHA allows the entire down payment to come from a gift from a family member, employer, or approved nonprofit. The donor must provide a gift letter confirming the funds are a gift, not a loan. This is one of the most borrower-friendly features of the FHA program.
What is FHA mortgage insurance and how much does it cost?
FHA requires two types of mortgage insurance: an upfront MIP of 1.75% of the loan amount (typically rolled into the loan), and an annual MIP charged monthly. For a 30-year FHA loan with less than 10% down, annual MIP is 0.55% of the loan balance, divided by 12. This MIP stays for the life of the loan unless you refinance to conventional once you have 20% equity.
How long after a bankruptcy can I get an FHA loan in Michigan?
FHA requires a 2-year waiting period after a Chapter 7 bankruptcy discharge, and a 1-year waiting period after filing Chapter 13 (with on-time plan payments and court approval). These waiting periods are shorter than many conventional loan requirements, which typically require 4 years post-Chapter 7.
Do FHA loans have income limits in Michigan?
No. Unlike some first-time buyer programs, FHA has no income ceiling. Any borrower who meets the credit, down payment, and DTI requirements may apply, regardless of household income. Income limits are a feature of certain state-level programs, not of FHA itself.
Can I buy a multi-unit property with an FHA loan?
Yes, FHA allows financing on 1-4 unit properties, but you must occupy one of the units as your primary residence. FHA loan limits for 2-4 unit properties are higher than for single-family homes. This can be a strong strategy for Michigan buyers who want to house-hack and offset their mortgage payment with rental income.
Why use Clear2 for my FHA loan instead of going to my bank?
Banks offer their own FHA products at retail rates with their own overlays. As an independent broker, Clear2 accesses wholesale FHA pricing from 50+ lenders, then selects the one with the best rate and most flexible overlays for your profile. Wholesale FHA rates are typically lower than retail bank rates because there is no branch overhead priced in.
No obligation, no hard credit pull. Just a clear picture of what you qualify for from a team that knows Michigan's FHA market.
Clear2 Mortgage, LLC. NMLS #1911663. Licensed Mortgage Broker. 2600 W Big Beaver Rd, Suite 100, Troy, MI 48084. Equal Housing Lender. This is not a commitment to lend. All loans subject to credit approval, property appraisal, and underwriting guidelines. Rates and terms subject to change without notice.
