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2022 Michigan First-Time Homebuyer Programs
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To help Michigan residents become homeowners, the state offers first-time homebuyer programs that provide financial assistance to qualified borrowers. Because these programs come with qualification requirements surrounding factors such as where you live, credit scores, minimum occupancy periods and if/when you need to pay back any of this assistance, it’s important to understand the differences between these programs.
Keep reading to learn more about how these first-time homebuyer programs work.
Michigan statewide and local first-time homebuyer programs
First-time homebuyers in Michigan may be able to qualify for a statewide or local down payment assistance (DPA) program if they meet certain requirements such as location and income limits.
|Program name||Assistance amount||Assistance type||Where it’s available|
|Michigan State Housing Development Authority (MSHDA) Down Payment Assistance||Up to $7,500||Nonforgivable loan||Statewide|
|MI Home Loan Flex||Up to $7,500||Nonforgivable loan||Statewide|
|MI Home Loan (MSHDA Bond Program)||Up to $7,500||Nonforgivable loan||Statewide|
|Mortgage Credit Certificate Program||20% of annual mortgage interest paid against year-end tax liability with a maximum credit of $2,000 a year||Tax credit for up to 30 years||Statewide|
What to know about different types of down payment assistance
All down payment assistance programs provide different amounts of aid in varying formats, and they all have unique application requirements. That being said, most programs do follow some similar structures. You’re most likely to encounter first-time homebuyer programs structured as grants or mortgages.
Grant-based first-time homebuyer programs give you money to put toward your down payment or closing costs and don’t require you to repay that money. Grant programs tend to be offered on a state or local municipality level. To qualify for these types of grants, you usually have to obtain a mortgage first. It’s worth noting that these grant programs can come with higher interest rates.
You may also encounter homebuying aid in the form of a “second mortgage.” To qualify for this type of aid, you need to first secure a regular mortgage, which will be referred to as your “first mortgage.” The second mortgage, which is what offers the down payment assistance, acts as a lien on your property. You may need to repay this second mortgage while you work on paying off your first mortgage, or the second mortgage may be completely forgiven after you live in the home for a set time period.
How Michigan first-time homebuyer programs work
All first-time homebuyer programs will have their own application process, but you can generally expect to encounter the following steps when you apply for one.
- Meet all program requirements. You will need to meet all of the program’s eligibility requirements such as income limits, credit score and recent homeownership. Before you apply for one of these programs, make sure you meet all eligibility requirements so you don’t waste time applying for assistance you won’t qualify for.
- Buy in an eligible area. While there are generally both statewide and more local programs to choose from, you have to buy a home in an eligible area for the specific first-time homebuyer program you’re applying to. You may be able to buy anywhere within the state, or the program may only apply to select cities, communities or counties.
- Confirm length of ownership restrictions. Some first-time homebuyer programs require recipients to own the home for a certain number of years to reap the full financial benefits of the program. If you choose to sell the home before the ownership period ends, you may have to repay some or all of the financial aid.
- Obtain homeownership counseling or education. Many of these programs will require that you attend homeownership counseling or pursue education about the responsibilities and potential costs of homeownership.
Michigan first-time homebuyer program requirements
You can spend a lot of time applying for first-time homebuyer programs, so it’s helpful to pay close attention to their requirements so you don’t waste time applying for a program that isn’t a good fit for you.
These are some examples of requirements for popular Michigan first-time homebuyer programs.
|Program name||Credit score minimum||Debt-to-income (DTI) ratio maximum||Maximum income limit||How long you have to live in home|
|Michigan State Housing Development Authority (MSHDA) Down Payment Assistance||640||45%||Household income limits vary by location||N/A|
|MI Home Loan Flex||640 or 660||45%||$74,000-$142,380||N/A|
|MI Home Loan (MSHDA Bond Program)||640 or 660||45%||$74,000-$142,380||N/A|
|Mortgage Credit Certificate Program||N/A||N/A||Household income limits can vary by location, property and family size||N/A|
National first-time homebuyer programs
Statewide or local first-time homebuyer programs aren’t your only options for financial support. There are also nationwide programs designed to help first-time buyers. To qualify for one of the Michigan programs previously mentioned, first-time buyers may need to also qualify for one of the programs listed below. However, these loans aren’t exclusive to first-time homebuyers, so they are more flexible in that sense.
→ Conventional loans. Conventional loans generally come from private lenders, require high credit scores and offer larger loan amounts than government-backed loans. Typically, you must have a 620 credit score to qualify for a conventional mortgage loan.
→ FHA loans. The Federal Housing Administration (FHA) backs FHA loans, and they can be a good fit for first-time homebuyers whose income levels limit their conventional financing options. You must provide proof of stable income over the past two years to qualify for an FHA loan.
→ VA loans. Active-duty and veteran service members can qualify for a VA loan from the U.S. Department of Veterans Affairs (VA) in order to buy up to a four-unit dwelling to be used as a primary residence. With a VA loan, no down payment or private mortgage insurance (PMI) is required.
→ USDA loans. Another type of government loan, USDA loans are guaranteed by the U.S. Department of Agriculture (USDA). These loans are designed for homes in rural areas and don’t require a down payment or PMI.
FAQs about Michigan’s first-time homebuyer programs
Who qualifies as a first-time homebuyer in Michigan?
Typically, someone who hasn’t owned a home in the three years prior to the date of purchase is seen as a first-time homebuyer. Many programs follow these standards, but it’s worth confirming how each program you want to apply for evaluates first-time buyers.
Can I qualify for down payment assistance in Michigan?
If you meet all of the program requirements (income, location of home, etc.) of a first-time homebuyer program that you want to apply for, then it’s quite possible to qualify for down payment assistance in the state of Michigan.
How much of a down payment do I need to buy a house in Michigan?
Every program will have different down payment requirements. For example, with a VA loan, you don’t need to make a down payment, whereas with an FHA loan, you need to make a down payment of at least 3.5%.
Home price trends in Michigan’s major areas
According to data from the National Association of Realtors (NAR), home prices are on the rise in Michigan counties. For example, from the second quarter of 2020 to the second quarter of 2021, in Gladwin County, the monthly mortgage payment went from $446 to $479. Oakland County saw a similar rise from $1,077 to $1,151.