Michigan First-Time Home Buying Assistance Programs & Grants for 2024

Michigan First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 02/2024)

    With Detroit’s revitalization, the resort towns on the shores of the Great Lakes, and the proximity to wilderness in the Upper Peninsula, Michigan real estate is hot. Sales are up about 1% year over year as of January 2024. What’s more, home prices are up 9.2% this past year. But despite that last stat, there’s good news for first-time homebuyers: The Wolverine State is still relatively affordable.

    The median sales price is currently $228,000, according to Redfin, a company that analyzes real estate data. That’s far below the national median existing-home sales price of $379,100.

    If you’re currently shopping for a home in Michigan or hope to be doing so in the near future, learn about the programs that can make becoming a first-time homebuyer in Michigan that much more affordable.

    Who Is Considered a First-Time Homebuyer in Michigan?

    First things first: A first-time homebuyer in Michigan, as elsewhere in the country, can be someone who is buying their first home ever, but it also can be a repeat buyer who has not owned a primary home in the past three years.

    The Michigan State Housing Development Authority will waive the first-time homebuyer requirement for some of its programs for buyers in certain targeted areas.

    💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

    4 Michigan Programs for First-Time Homebuyers

    First-time homebuyers looking to settle in Michigan may find help through the Michigan State Housing Development Authority . Here are details about the agency’s mortgage and down payment assistance programs.

    1. MI Home Loan Program

    This program offers 30-year fixed-rate conventional, FHA, VA, and USDA mortgages at below-market interest rates to first-time homebuyers and those who buy in targeted areas . The loan can be paired with the Michigan Housing down payment assistance program described below.

    Household income limits apply, and depend on location and family size. Your purchase price may not exceed $224,500, and a credit score of 640 is typically required.

    If you’re using the down payment assistance program, all adult household members usually need to complete a housing education course (which can help buyers understand how much house they can afford).

    2. Michigan Down Payment Program

    Michigan Home Loan borrowers may find down payment help in the form of loans for $10,000 throughout the state through the Michigan Down Payment Program . These second mortgages come with no interest or monthly payments. The loan must be paid back when you sell, refinance, or pay off your first mortgage.

    3. Mortgage Credit Certificate

    Michigan’s home mortgage credit allows first-time buyers and repeat buyers in targeted areas to claim a federal tax credit equal to 20% of their annual mortgage interest, up to $2,000 a year. Unfortunately, the Michigan Home Loan programs do not cover a mortgage credit certificate. Borrowers using conventional mortgages may be able to take the credit.

    There are fees associated with applying for and receiving a mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh the fees.

    Recommended: Understanding the Different Types of Mortgage Loans

    4. Local Homebuyer Assistance Programs

    Local housing initiatives in urban areas such as Detroit and Grand Rapids offer help with down payments, closing costs, and other assistance for first-time buyers in certain areas. It can be well worth your while to research these options online, as well as educate yourself about the ins and out of being a first-time homebuyer in general.

    How to Apply to Michigan Programs for First-Time Homebuyers

    A housing counselor or experienced lender can help determine which programs you might be eligible for, based on income, debt, credit score, and purchase price.

    State Loan and Assistance Programs

    Find and contact counseling agencies and loan officers by county if you’re interested in a Michigan housing authority mortgage and down payment assistance program.

    Local Programs

    Many local assistance programs are offered through lenders themselves, so it’s important to compare lending options.

    HUD lists local contacts that may be of help to first-time homebuyers.

    MCC Program

    To apply for a mortgage credit certificate, homebuyers must contact a lender approved by the Michigan State Housing Development Authority.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, they can be especially helpful for true first-time buyers or people who haven’t owned a home in several years.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the US Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Some details to note:

    •   Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher.

    •   Those with low credit scores (between 500 and 579) must put at least 10% down.

    •   In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 57% in some cases, vs. a typical 45% to 50% maximum for a conventional loan.

    •   Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    •   FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years.

    You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    •   The Home Possible mortgage is for buyers who have a credit score of at least 660.

    •   Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; the cost may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Take note, however: This 97 LTV Loan is only available for one-unit single-family homes, co-ops, condos, and planned unit developments which you will be used as a primary residence.

    Department of Veterans Affairs (VA) Loans

    Loans backed by the Department of Veterans Affairs can be offered to qualifying active-duty members of the military, veterans, and eligible family members. These VA loans, which can be used to buy, build, or improve homes, typically have lower interest rates than most other mortgages available. What’s more, they usually don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Another nice benefit of these loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And VA loans have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    If you apply for a VA loan, you will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    Native American Veteran Direct Loans (NADLs)

    If you are a Native American veteran or their spouse, you may be able to use these no-down-payment loans to buy, improve, or build a home on property that’s federal trust land. Unlike the VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee. You can learn more about this mortgage option by emailing [email protected].

    US Department of Agriculture (USDA) Loans

    You don’t have to pay any down payment on these loans, which are made to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    In addition, the USDA directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    HUD’s Good Neighbor Next Door Program can help firefighters, emergency medical technicians, police officers, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD deems a “revitalization area,” but they must live in the home for at least three years.

    HUD also offers general information on homeownership in Michigan .

    💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

    Michigan First-Time Homebuyer Stats for 2024

    As you think about becoming a property owner in Michigan, take a look at these figures about home buying.

    •  First-time homebuyers in the U.S.: 50% of all homebuyers

    •  Median age of first-time homebuyers in U.S.: 36

    •  Median home price in Michigan: $228,000

    •  Average down payment in Michigan: 14.2%

    •  Average credit score of homebuyer in Michigan: 708

    Financing Tips for First-Time Homebuyers

    Along with federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers to make a one-time, penalty-free withdrawal of up to $10,000 from their IRA, provided that the funds are used to buy, build, or rebuild a home. In terms of how the IRS defines a first-time homebuyer, that would be anyone who has not owned a primary residence in the past three years.

    Here’s a heads-up: You will still owe income taxes on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Roth IRA contributions are made with after-tax money, and the IRS permits you to make tax- and penalty-free withdrawals of contributions for any reason (as long as you’ve held the account for five years).

    You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. If you’ve held your account for less than five years, homebuyers will pay income tax on earnings they withdraw.

    •  401(k) loans. There’s the possibility that your employer may allow borrowing from a 401(k) plan that it sponsors. If so, you may consider taking a loan against the 401(k) account to help finance your home purchase. Many plans permit you to borrow up to 50% of your 401(k) balance, up to $50,000, without being liable for taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 25 years to pay it back.

    •  State and local down payment assistance programs. These programs are typically available at the regional or county level. They can offer flexible second mortgages for first-time buyers who are searching for resources that can help them afford a down payment.

    •  The mortgage credit certificate program. If you’re a first-time homeowners and buy in targeted areas, you may be able to claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction.

    To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. Take note: If you refinance your mortgage, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back.

    In addition, there are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Check with your employer to see if they offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. It can be worthwhile to ask your lender about any first-time homebuyer grant or down payment assistance programs that may be available from government, nonprofit, and community organizations in your area.

    The Takeaway

    If you are a first-time buyer in Michigan, you may be able to get help with your mortgage and down payment through state and local programs. These can lower your costs and make purchasing a property more affordable. It can also be worthwhile to consider conventional loans from private lenders; they can have advantages.

    Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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    Should I take first-time homebuyer classes?

    It can be a good idea, especially for first-time homebuyers who may not yet know the jargon and steps involved when applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some federal and Michigan government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Many government and nonprofit homeowner assistance programs are available to people with low credit scores, with interest rates and other loan pricing competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications so it’s wise to build your score before house hunting if possible.

    Is there a first-time homebuyer tax credit in Michigan?

    Yes. As explained above, homebuyers may be able to claim a credit for up to 20% of the mortgage interest they pay each year, up to $2,000 a year. Upfront fees apply, but the credit can be taken each year for the life of the loan. Unfortunately, borrowers who have loans from the Michigan State Housing Development Authority are not eligible for the tax credit.

    Is there a first-time veteran homebuyer assistance program in Michigan?

    Many of Michigan’s homebuyer programs include veteran benefits. Michigan veterans also may find options in the federal Department of Veterans Affairs and Native American Veteran Direct Loan programs described above.

    What credit score do I need for first-time homebuyer assistance in Michigan?

    Most programs administered by the Michigan State Housing Development Authority require a credit score of 640 or above. But there are other state, federal, and private loan programs that borrowers who have lower scores may be able to access.

    What is the average age of first-time homebuyers in Michigan?

    The typical age of first-time buyers nationally is 36, according to the National Association of Realtors®, and so the figure for Michigan is probably close to that.

    Photo credit: iStock/Peeter Viisimaa

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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