Michigan MI Home Loan Down Payment Assistance

Quick Facts

Program administrator: Michigan State Housing Development Authority (MSHDA), partnering with a statewide network of approved lenders.
Benefit structure: 30-year fixed-rate mortgage paired with a zero-interest, forgivable second mortgage that covers down payment and closing costs.
Assistance amounts: $7,500 statewide; up to $10,000 in designated opportunity areas including Detroit, Flint, Grand Rapids, and select rural communities.
Forgiveness terms: The second mortgage is forgiven 20% per year over five years with no monthly payments. Selling, refinancing, or moving out before year five triggers repayment of the unforgiven balance.
Layering: Compatible with USDA, VA, and FHA first mortgages as well as local grants, employer-assisted housing, and Individual Development Account (IDA) matches.
Target audience: First-time buyers (no home ownership in the past three years) and repeat buyers purchasing in target areas; income and purchase price caps apply.

Program Overview

Michigan’s MI Home Loan program remains one of the Midwest’s most accessible down payment assistance (DPA) options. The package combines a competitive fixed-rate mortgage with a forgivable second lien that covers the down payment and closing costs many households struggle to accumulate. While MSHDA offers multiple programs, the flagship MI Home Loan is notable because it serves both urban revitalization corridors and rural counties facing appraisal gaps. By pairing affordable financing with seasoned lender partners, MSHDA provides a turnkey path for renters to transition into homeownership without depleting emergency savings.

In 2025 MSHDA refreshed underwriting guidelines to reflect post-pandemic market realities. Credit score minimums remain at 640 for single-family homes, but the agency now recognizes alternative credit data—such as on-time rent, utility, and streaming service payments—when borrowers lack traditional credit histories. Additionally, the statewide DPA cap increased to $7,500, while the target area cap rose to $10,000 to reflect rising closing costs and private mortgage insurance premiums. MSHDA also expanded its lender training curriculum, adding modules on cultural competency and multilingual counseling to ensure equitable access for communities of color disproportionately affected by appraisal bias and mortgage denials.

Why the Program Matters in 2025

Michigan’s housing market faces inventory constraints, especially for starter homes under $200,000. Rising interest rates and property taxes have sidelined many aspiring buyers who otherwise have steady income. The MI Home Loan DPA addresses two primary hurdles: the upfront cash requirement and the anxiety around navigating complex mortgage processes. By eliminating the down payment hurdle and providing stable, long-term financing, the program keeps homeownership within reach for teachers, nurses, skilled trades workers, and small business owners. The forgiveness structure also rewards tenure, encouraging buyers to invest in their neighborhoods while building equity.

The program aligns with Michigan’s Sixty by 30 talent goal by helping graduates settle in-state. University and community college alumni who stay in Michigan often qualify for employer homebuyer incentives that stack with MI Home Loan assistance. Meanwhile, revitalization of Detroit and Flint receives a boost as the higher $10,000 DPA offsets renovation costs and property tax escrow requirements. For tribal communities and rural counties, the program’s partnership with USDA and VA financing ensures veterans and Native families can secure homes without needing conventional down payments.

Eligibility Details

Credit benchmarks: Minimum 640 FICO for one-unit homes and 660 for duplexes. Borrowers lacking a credit score can build nontraditional credit through 12 months of rent, utility, insurance, or cell phone payments. Lenders compile a Verification of Rent form and credit references to submit to MSHDA’s underwriters.
Income limits: Vary by county and household size. For example, in Wayne County, the 2025 limit is $93,960 for one- to two-person households and $109,620 for three or more. MSHDA publishes an annual matrix; lenders will confirm you fall within limits before issuing a pre-approval.
Purchase price caps: Also county-specific. In most counties the cap is $224,500 for existing homes and $349,500 for new construction. Target areas allow higher caps to stimulate investment. Check MSHDA’s Excel matrix or interactive map.
Homebuyer education: All borrowers must complete a HUD- or MSHDA-approved course before closing. Online modules through eHome America or Housing Education Services cost around $99 and include counseling sessions that produce a completion certificate.
Occupancy requirement: You must move in within 60 days of closing and use the property as your primary residence for five years to secure full forgiveness.

Step-by-Step Application Roadmap

Assess readiness: Review your credit report at AnnualCreditReport.com. Dispute errors and pay down high revolving balances to meet the 640 threshold. Gather two months of bank statements and 30 days of pay stubs.
Choose an approved lender: Visit MSHDA’s lender directory to find loan officers experienced with MI Home Loan. Interview at least two to compare rates, lender fees, and familiarity with layered assistance.
Secure pre-approval: Provide income documentation, W-2s, tax returns (if self-employed), and asset statements. Lenders will run automated underwriting through FHA TOTAL Scorecard or GUS (for USDA loans) and pair it with MSHDA overlays.
Enroll in homebuyer education: Complete the course early to understand budgeting, maintenance, and foreclosure prevention. Keep the completion certificate ready for your lender and title company.
Shop for homes within limits: Use MSHDA’s DPA map to identify target areas where $10,000 assistance applies. Factor property taxes, insurance, and homeowner association dues into your budget.
Execute purchase agreement: Include contingencies for inspection, financing, and appraisal. Ensure the contract lists MSHDA MI Home Loan as the financing type to streamline lender paperwork.
Submit loan application: Your lender packages the first mortgage and the DPA second lien. Expect to sign two sets of disclosures: one for the FHA/VA/Conventional first mortgage and another for the MSHDA lien.
Complete inspections and appraisal: Address required repairs promptly. MSHDA does not allow escrow holdbacks for health-and-safety items; coordinate with sellers to remedy issues before closing.
Final underwriting and closing disclosure: Review the Closing Disclosure three days before closing. It will show the $7,500 or $10,000 DPA applied as a credit toward down payment and closing costs.
Closing and move-in: Sign documents, receive keys, and plan to occupy within 60 days. Set up automatic mortgage payments to avoid late fees.

Strategies to Strengthen Your Application

Boost credit proactively: Pay down credit card balances to below 30% utilization, set up autopay to avoid late payments, and add positive trade lines like credit builder loans if your profile is thin. Provide documentation of on-time rent to build alternative credit.
Layer assistance responsibly: Combine MI Home Loan with employer grants (e.g., Ford’s Mobility Home Incentive), local land bank purchase credits, or community development block grant funds. Ensure total assistance doesn’t exceed closing costs; leftover funds may need to be returned, delaying closing.
Plan for reserves: While MSHDA doesn’t require large reserves, underwriters like to see one to two months of mortgage payments saved. Consider state tax refunds or bonus income to pad savings before closing.
Document gift funds correctly: If family members contribute, provide gift letters and proof of transfer. MSHDA accepts seasoned funds, but large unexplained deposits trigger red flags.
Address student loans: Income-driven repayment plans can count toward debt-to-income ratios. Provide documentation of monthly payment amounts to avoid lenders using higher standard amounts.
Schedule counseling follow-ups: Many HUD-approved agencies offer post-purchase coaching. Staying engaged helps you budget for maintenance, understand tax escrow changes, and plan for long-term financial goals.

Tips for Special Buyer Profiles

Public service workers: Teachers, firefighters, nurses, and police officers often qualify for employer or union grants. Stack these with MI Home Loan to reduce monthly payments by purchasing down the interest rate.
Self-employed borrowers: Prepare two years of tax returns and year-to-date profit-and-loss statements. Work with accountants to minimize aggressive deductions that lower qualifying income. Consider forming an accountable plan to reimburse business expenses without inflating debt ratios.
Veterans and active duty service members: Pair MI Home Loan DPA with VA mortgages. VA loans waive mortgage insurance premiums, freeing up cash flow for maintenance and furnishing. Provide DD-214 or Statement of Service documents early.
Manufactured home buyers: MI Home Loan allows double-wide manufactured homes built after June 15, 1976. Ensure the home is on a permanent foundation and submit engineer foundation certifications as required.
Multi-unit buyers: Duplex purchases are eligible if you occupy one unit. Remember the 660 credit score minimum and verify projected rental income with market rent surveys. Lenders will count 75% of rental income to offset the payment.

Post-Closing Success Plan

Set up escrow cushion: MSHDA escrows taxes and insurance. Review annual escrow analyses and prepare for adjustments, especially in municipalities with rising millage rates.
Claim the Michigan Homestead Property Tax Credit: File Form MI-1040CR each year to recapture a portion of property taxes if your household income falls under $60,600.
Schedule annual maintenance: Budget 1% of the home’s value for repairs. Use a sinking fund for roof, HVAC, and appliance replacements to avoid taking on high-interest debt.
Monitor property values: After three years of on-time payments and sufficient equity (typically 20%), consult your lender about removing FHA mortgage insurance through refinancing. Ensure you’ve met the five-year forgiveness milestone to avoid repaying assistance.
Stay in touch with counseling agencies: Participate in quarterly webinars on energy efficiency upgrades, property tax appeals, and foreclosure prevention offered by MSHDA partners.

Preventing Pitfalls

Overextending budget: Avoid stretching to the maximum purchase price cap if it leaves no room for maintenance. Use MSHDA’s mortgage calculator to test scenarios with insurance and taxes included.
Ignoring appraisal gaps: In hot markets, homes may appraise below purchase price. Negotiate appraisal guarantees carefully and have backup funds if the seller won’t reduce price. The DPA cannot cover appraisal gaps.
Missing occupancy deadline: Document move-in with utility transfers, driver’s license updates, and voter registration. Failing to occupy within 60 days triggers repayment and possible program exclusion.
Early refinancing without plan: If rates drop, consult MSHDA before refinancing. You can refinance the first mortgage, but you must pay off the remaining DPA balance unless you’ve reached full forgiveness. Budget accordingly.
Delinquent property taxes: Nonpayment can result in tax foreclosure. If hardship strikes, contact your county treasurer about payment plans and reach out to the Step Forward Michigan program for emergency assistance.

Resource Directory

MSHDA Homeownership Hotline: 1-855-MI-HOME1 for loan status updates and counseling referrals.
Housing counseling agencies: Southwest Solutions (Detroit), LINC UP (Grand Rapids), United Housing Coalition (Upper Peninsula) offer bilingual support.
Lender training webinars: Quarterly sessions cover underwriting updates; borrowers can attend to understand the process better.
Energy efficiency incentives: Pair the DPA with Consumers Energy and DTE rebates for insulation, smart thermostats, and appliance upgrades to lower monthly bills.
Local land banks: Wayne, Genesee, and Ingham County land banks offer discounted homes that qualify for MI Home Loan financing once code-compliant.

Timeline Checklist

Stage	Action	Timing
Pre-approval	Pull credit, gather documents, interview lenders	60–90 days before house hunting
Education	Complete HUD-approved class	Before signing purchase agreement
Contract	Lock interest rate, order inspection	Within 5 days of accepted offer
Underwriting	Respond to conditions (letters of explanation, updated pay stubs)	Weeks 2–4
Closing	Review Closing Disclosure, schedule final walk-through	3 days before closing
Post-close	Transfer utilities, set up autopay, update address	Within first week
Year 1	Schedule maintenance checks, review escrow	Quarterly
Year 5	Confirm DPA forgiveness completion; store release letter	Anniversary month

Final Thoughts

The MI Home Loan Down Payment Assistance program transforms Michigan’s housing landscape by removing the most stubborn barrier to homeownership—upfront cash. With careful preparation, disciplined documentation, and proactive communication with your lender and housing counselor, you can navigate underwriting, closing, and the critical first five years with confidence. The program’s forgivable second mortgage rewards stability, so treat your home as a long-term investment: maintain it, budget for repairs, and engage with community resources. As property values appreciate and the assistance forgives, you’ll build equity that can fund future goals—from college savings to small business ventures—anchoring your family’s financial security in Michigan’s vibrant communities.