Are you planning to buy your first ever home, and wondering if you qualify for a first-time homebuyer grant or Down Payment Assistance Program in Michigan? Well, the good news is you’ve come to the right place. Michigan is a state that does offer down payment assistance programs to help first-time home buyers purchase their first home and some programs can offer up to $10,000 to help you make your down payment.
We will explore the different types of down payment assistance programs for first-time homebuyers in Michigan.
What Are The Different Loan Programs Available in Michigan?
MSHDA (Michigan State Housing Housing Development Authority) Program
AFR Down Payment Grant Program
What is the MSHDA Loan?
Michigan State Housing Development Authority (MSHDA) offers first-time homebuyers up to $10,000 in down payment assistance. It is important to recognize that this is not a grant (which is NOT required to be repaid), it is a loan that MUST be repaid. The good news is that it is offered at 0% interest rate and does not require you to make regular payments -homeowners can defer to repaying the loan once they sell the house.
What are the Eligibility Requirements for MSHDA Loan?
- Minimum Credit Score – 640
- Income limits – The applicant must fall within income limits. These vary based on targeted and non-targeted areas.
- Maximum Home Sale Price – $224,500.
- The maximum Debt to Income (DTI) ratio is 45%
- The maximum amount of income can be spent on housing expenses and long-term debt.
- Homebuyer Education Class
- Available to first time and repeat homebuyers
- Collections and judgments do not necessarily need to be paid off
What options are there within the MHSDA program?
There are a few programs within the MSHDA but the most popular are:
MI Home Loans
MI Home Flex
MI Home Loans
MI home loan offers a 30-year mortgage to first-time homebuyers with a fixed interest rate from a participating lender. This is due to the bond program subsidizing the mortgage interest rates and bringing them lower than any other market lenders.
You can also combine a MI Home Loan with your Michigan Down Payment Assistance However, if you wish to buy a multi-section home, the credit score requirement will be a little bit higher at 660. The only drawback of this loan is that all adults of the family must meet this eligibility criterion.
Additionally, some household limits may apply based on your family’s size and location of the property. MI home loans are suitable for first-time homebuyers with low or moderate income.
The rest of the eligibility criteria stay the same as the MI home loan program. However, if you borrow more than 95 percent of the property’s value, you will have to complete their homebuyer education course.
MI Home Flex
You can also use a MI home loan flex option with low interest rates and combine it with MSHDA down payment assistance. However, this particular first-time homebuyer loan in Michigan does not apply to all types of homes. Also, the maximum amount available for the Home Flex is 7,500
- Available to first-time and repeat homebuyers statewide.
- All adults in the household DO NOT need to apply. Only qualifying borrowers will be underwritten for credit, assets, and income.
- Collections and judgments DO NOT necessarily need to be paid off; the lender will follow their Automated Underwriting System findings.
- Income limits can vary depending on family size and property location.
- The maximum sales price is $224,500 statewide.
- A minimum credit score of 660 required.
What is the AFR Down Payment Assistance Program?
The AFR down payment assistance program is another alternative to receive down payment assistance in Michigan. This program offers a 3.5% grant of the purchase price if you meet eligibility requirements. This is a MUCH bigger benefit than the MSHDA program as the assistance comes in a grant which does NOT have to be repaid!
As an independent Mortgage Broker, Best Rate is partnered with multiple lenders including AFR to offer the best loan programs for our clients. If you are seeking a Down Payment Assistance grant we may have options for you!
What are the Eligibility Requirements for the AFR Down Payment Assistance grant?
- Minimum Credit Score – 620
- Income limits – Not considered unless you are using them to qualify.
- Maximum Home Sale Price – $548,250
- Maximum LTV/CLTV/HCLTV – 96.5%
- Maximum Debt to Income (DTI) ration is 48.99%
- The maximum amount of income can be spent on housing expenses and long-term debt.
- Homebuyer Education Class
- Available to first-time home buyers and first responders.
- Property cannot be TBD.
- Collections and judgments do not necessarily need to be paid off
Although it is a great program it does have drawbacks. First, the interest rate for this program is higher than most. However, they DO allow you to refinance after 6 months into a lower interest rate. The other thing to overcome is the property cannot be TBD. In such a tough market most buyers and agents are putting multiple offers regularly trying to win the bidding war. This creates a challenge because most people just need to be pre-approved and don’t have a set property.
Other Federal Grants
The state of Michigan is trying to make homeownership a more achievable dream for its residence. However, apart from MSHDA, there are several other federal state first-time homebuyer grants in Michigan to help you become a homeowner. Here are the names of the few.
- FHA loans – for first-time homebuyers without a strong credit score and/or sufficient savings
- VA loans – for veterans with low or moderate income and limited savings
- USDA loans – for first-time homebuyers with low or moderate income and who are looking to live in a semi-rural or rural area
- Good Neighbor Next Door Program – for public servants without adequate saving to buy a typical home
- Fannie Mae/Freddie Mac – if you cannot afford a typical down payment and do not qualify for any other federal first-time homebuyer grant.
MCC Program Can Help
If you are a first-time homebuyer in Michigan, you must consider filing for an MCC, i.e., Mortgage Credit Certificate Program. This program allows you as a first-time homebuyer to claim 20 percent of your annual mortgage interest back as tax credit with your federal tax return.
This will provide you a dollar-for-dollar reduction in your tax liability each year till you have paid off your original mortgage. Combine this with your MSHDA loan, and you can really end up saving a substantial sum of money.
That said, always keep in mind that you will still have to meet HUD and MSHDA income criteria in order to qualify for lower tax rates and higher savings. Moreover, like previous loans, your house must again cost lower than $224,500.
How Can I Buy a House with No Money Down in Michigan
In some cases, you can even get a mortgage as a first-time homebuyer with zero percent down payments such as USDA or VA loans.
Things to Consider When Buying a Home in Michigan
As a first-time homebuyer in Michigan, here are some things you may want to consider.
- Do some research in the real estate market before picking a home
- Only use trusted Michigan-based real estate agents
- Use a Mortgage Broker or Loan Officer that is experienced in this area.
- Research into several financing options may help you save money and secure a good mortgage deal.
- Know your property taxes and stay complaint
- Do not forget the importance of adequate homeowners insurance, especially if your home location is in a flood-zone or with any other extreme weather conditions.
- Know the HOA rules
- Moreover, expect to pay the closing costs
A Professional Advisor Can Help
Before looking for into first-time homebuyer grant in Michigan, it would be wise to consider enlisting a professional advisor. They or Best Rate can help you understand which grant might be best for you and how your mortgage is going to impact your future financial status.
