How Much Do You Actually Need for a Down Payment in Michigan? (It’s Probably Not 20%)

Program minimums current as of October 2026 — guidelines change; verify before acting.

Quick answer

Most first-time buyers in Michigan put down between 3% and 5%. Veterans and some rural buyers can put down nothing. Twenty percent is a choice, not a requirement.

On a $250,000 home — close to the middle of the Grand Rapids market — the program minimums look like this:

The 20% number comes from one real thing: at 20% down on a conventional loan, you don’t pay private mortgage insurance. That’s a legitimate benefit. It is not the price of admission.

Where the “20%” idea comes from — and what it actually buys

Private mortgage insurance (PMI) is the cost of putting down less than 20% on a conventional loan. It protects the lender, not you, and it’s added to your monthly payment. The less you put down and the lower your credit score, the more it costs.

Twenty percent down means no PMI, somewhat better pricing, and a smaller loan. All real. But here’s the honest math most people never run: on a $250,000 house, the gap between 5% and 20% down is $37,500 in cash. For most households, saving that takes years — years of rent, years of home prices moving, years of not building equity. PMI on that same loan is usually a modest monthly cost that depends on your credit score and down payment, and on a conventional loan it goes away once you reach 20% equity and request it.

So the real question isn’t “should I wait until I have 20%?” It’s “what does waiting cost me versus what PMI costs me?” For many buyers, PMI is the cheaper of the two. For some, waiting is right. That’s a calculation, not a rule.

The real minimums, loan by loan

Conventional — 3% or 5%

The 3% option is available if at least one borrower is a first-time buyer (hasn’t owned a home in the last three years), or through income-qualified programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, which have income limits tied to the area. Everyone else is at 5%.

PMI applies under 20%, and this is where conventional has an advantage: PMI can be removed. You can request cancellation at 80% loan-to-value, and it drops off automatically at 78%. Pay the loan down, or let the value rise, and the cost goes away.

FHA — 3.5%

FHA’s minimum is a 580 credit score; individual lenders may set higher. (Scores from 500–579 require 10% down — possible, but a case for working on the score first.) FHA is more forgiving on credit and debt-to-income than conventional, which is why it’s the right loan for a lot of buyers.

The trade-off: FHA mortgage insurance has an upfront premium (usually financed into the loan) plus a monthly premium, and with less than 10% down, the monthly premium stays for the life of the loan. The usual exit is refinancing into a conventional loan once you have 20% equity — which is a real path, not a theoretical one, and it’s worth planning for from day one.

VA — 0%

For eligible veterans, active-duty service members, National Guard and Reserve members with qualifying service, and some surviving spouses. No down payment, no monthly mortgage insurance. There is a one-time VA funding fee, which can be financed, and which is generally waived for veterans receiving VA disability compensation. If you’ve served, this is almost always the first loan to look at.

USDA — 0%

Zero down for homes in USDA-eligible rural areas, with household income limits. People hear “rural” and assume it doesn’t apply to them — but parts of Kent, Ottawa, Allegan, and Barry counties outside the Grand Rapids metro are eligible. It’s worth checking the address before assuming. USDA has a guarantee fee and a modest annual fee, both lower than FHA’s.

Where the money can come from

Your down payment doesn’t all have to come from your own savings.

• Gift funds. Money from a family member (and on some programs, a close friend or employer) can cover part or all of the down payment on conventional, FHA, VA, and USDA loans. The giver signs a gift letter stating it isn’t a loan, and the lender documents the transfer. This is routine — a large share of first-time buyers use some gift money.
• Down payment assistance. Michigan also offers down payment assistance through MSHDA for eligible buyers, which can be layered on FHA, conventional, and some other loans. Income and price limits apply — ask.
• Seller concessions can cover closing costs — but not the down payment. Those are separate, and the distinction matters. A seller can pay your closing costs; they can’t pay your down payment.
• Retirement accounts. A 401(k) loan or a first-time-buyer IRA withdrawal can be used, with tax and long-term trade-offs worth understanding before you do it.
• Sale of an asset — a car, a boat, anything with a paper trail. Document it.

What doesn’t work: cash that can’t be traced. A large unexplained deposit in the 60 days before applying is the single most common source-of-funds problem in underwriting. If you’re moving money around before a purchase, tell your lender first.

The honest part: a lower down payment costs more every month

A smaller down payment means a bigger loan, a higher payment, and mortgage insurance. That’s the trade. It isn’t a reason not to buy with 3% or 5% down — it’s a reason to run the real monthly number before you fall in love with a house.

Three things I’d tell anyone deciding how much to put down:

1. Don’t empty the account to hit a number. A buyer who puts 10% down and has nothing left is in a worse position than one who puts 5% down and keeps a few months of expenses in reserve. Houses need things. Underwriters notice reserves too.
2. The down payment is not the only cash. Closing costs typically run another 2–4% of the price in Michigan, and prepaid taxes and insurance go on top. Budget for cash to close, not just the down payment. (I’ve written up what closing costs actually look like in Michigan if you want the detail.)
3. A bigger down payment isn’t always the best use of the money. If you’re carrying a car loan at a high rate, paying that off before closing might lower your payment more than an extra 2% down would — and improve your approval. That’s a conversation worth having early.

Frequently asked questions

Do you need 20% down to buy a house in Michigan? No. Conventional loans go as low as 3% for first-time buyers and 5% for everyone else; FHA is 3.5%; VA and USDA are 0% for eligible buyers. Twenty percent avoids mortgage insurance but isn’t required.

What is the minimum down payment for a first-time home buyer in Michigan? Three percent on a conventional loan, 3.5% on FHA, and 0% on VA or USDA if you qualify. On a $250,000 home, 3% is $7,500.

Can my parents give me money for a down payment? Yes. Gift funds from family are allowed on all major loan types, documented with a gift letter and a record of the transfer. On a conventional loan, a gift can cover the entire down payment.

Can the seller pay my down payment? No. Sellers can contribute toward closing costs and prepaids within program limits, but the down payment has to come from you or an allowed gift.

Is PMI permanent? On a conventional loan, no — it can be canceled at 80% loan-to-value and ends automatically at 78%. On FHA loans with less than 10% down, the monthly premium lasts for the life of the loan; the usual exit is a later refinance into a conventional loan.

Is it better to put more down or keep cash in savings? It depends on the numbers, but a buyer with reserves is in a stronger position than one who’s cash-poor after closing. Run both scenarios before deciding.

How much do I need in total to buy a house? Down payment plus closing costs plus prepaids. Plan for the down payment plus roughly 2–4% of the price for closing costs and prepaids, less any seller concession or lender credit. Your Loan Estimate shows the exact cash to close.

Who do you work with in West Michigan? Buyers and homeowners across Grand Rapids, Grandville, Wyoming, Kentwood, Rockford, Ada, Jenison, Caledonia, Holland, and the surrounding Kent, Ottawa, Allegan, and Barry county communities.

Not sure how much you actually need, or which loan fits what you’ve saved? That’s a fifteen-minute conversation, no application required. Call or email me — and if the honest answer is “save for six more months and you’ll buy better,” that’s what you’ll hear.

Joe Bastien · Bastien Mortgage LLC · NMLS #2392887 · Company NMLS #2852005 · 616-369-0021 · joe@bastienmtg.com · bastienmortgagemi.com · 446 Hubbard St NE, Grand Rapids, MI 49525 · Equal Housing Opportunity

This article is educational and is not a loan offer, approval, or commitment to lend. All loans are subject to underwriting approval. Dollar figures are illustrative examples at an assumed purchase price, not quotes. Program minimums, credit score thresholds, income limits, mortgage insurance rules, and down payment assistance availability are summarized and subject to change — confirm current requirements before acting. Current as of October 2026.