Michigan Down Payment Assistance Programs for First-Time Home Buyers
Homeownership might not be as far off as you think with Treadstone’s down payment assistance options! For first-time home buyers, these options directly decrease the amount of cash needed at closing, making home ownership achievable for more buyers. Not all programs or options are available for all buyers. If you’re starting the search for a new home, our Loan Officers can tell you the exact programs you qualify for and get you on the market—fast.
What is Down Payment Assistance?
Down payment assistance is an “add-on” to your home loan that helps with the up-front costs associated with purchasing a home. That includes both closing costs (the fees from the transaction, such as appraisals, title fees, etc.) and your down payment. The goal of these programs is to make homeownership more affordable and accessible for people who might not otherwise be able to fully afford a down payment.
Down payment assistance can be second loans, grants, or forgivable loans, separate from your home mortgage.
Eligibility requirements vary and include minimum credit scores, maximum income limits, location restrictions, and property conditions. These are similar, but separate, from the requirements for your standard home loan program, like FHA, conventional, RD, or VA.
How Does Down Payment Assistance work?
To start, you’ll need to apply with a licensed Loan Officer to verify eligibility for a down payment assistance program. This process works together with the rest of the process to get a home loan while you’re searching for homes with your real estate agent. Depending on the loan program chosen by you and your Loan Officer, the funds from a down payment assistance program may be used for your down payment and/or closing costs.
While some funds may need to be repaid over time (sometimes with little or no interest), others may even have the debt forgiven if certain conditions are met, such as living in the home for a certain number of years or making on-time payments over a set time period.
Some down payment assistance programs may allow you to defer repayment until you refinance or pay off your mortgage or move to another home. Don’t worry— your Loan Officer will help every step of the way and will answer all your questions!
Types of Down Payment Assistance in Michigan
Down payment assistance programs may be available in one or more of the following for buyers of many types:
- Grants are the are the most sought-after type of down payment assistance since there is no requirement to pay it back— ever. Grants are typically reserved for those in the greatest financial need and are commonly gifted by non-profits or local cities and counties.
- Second mortgages are the most popular option for down payment assistance. While your primary loan funds the principal of your new home, a second mortgage covers your down payment. They come in a range of options, from low-interest loans, deferred payment loans (usually due in full when your home is sold, refinanced, or paid off), and loans with separate monthly payments.
- Forgivable loans are similar to the second mortgages but have additional stipulations granting second loan forgiveness if certain requirements are met. For example, on time payments over 36 consecutive months may result in second loan forgiveness.
Regardless of type, down payment assistance is commonly offered by government agencies (like your state or city), non-profit organizations, or sometimes even by the lender.
More Down Payment Options for First-Time Home Buyers
For buyers looking for a flexible down payment solution, more options exist! Here are a few:
- 0% down home loans: For home buyers in Michigan, there are two loan programs available that offer 0% down: USDA and VA loans.
- USDA loans: Also known as Rural Development (RD) Loans, are backed by the US government and are offered only for buyers in rural areas. You can check the qualification maps to find where you can buy for zero money needed for a down payment!
- VA loans: Offered exclusively to veterans, active military, or their surviving spouses. These loans offer down payments as low as 0% down for many property types, and don’t require mortgage insurance!
First-time Home Buyers Savings Account
The State of Michigan has a unique program for first-time home buyers to save for a down payment without paying state taxes on those savings or investments. You may have heard of the 529 Education Savings Program—the Michigan First-Time Home Buyers Savings Account works similarly.
Even if you’re not planning to purchase for a few years, making a game plan with a Loan Officer is critical to ensure a smooth transaction in the future.
Eligibility Requirements for Down Payment Assistance in Michigan
To qualify for assistance, Michigan home buyers typically must meet certain income and credit requirements, as well as attend a homebuyer education course. The home buyer, including first-time home buyers, may also have to live in the home (declaring it their “primary residence”) and the property should be within certain price range.
Additionally, programs offering down payment assistance for homebuyers in Michigan are used in combination with your standard home loan options, like conventional or FHA loans. You will need to qualify for both your standard loan program and the down payment assistance requirements.
Because eligibility requirements for down payment assistance programs change frequently with a broad range of options available, it’s best to check with your Loan Officer to find the best options for you.
How Do I Get started With Down Payment Assistance in Michigan?
Your first step is to get in touch with a Loan Officer and start planning, along with an application! Your Loan Officer at Treadstone will be a down payment assistance expert. They know the terms and requirements, along with the tricks for getting the best value from your home financing.
This process typically includes submitting the necessary documentation, such as proof of income, credit report, and other financial information. The program administrator will usually review the application and determine if the borrower is eligible for a specific program.
Frequently Asked Questions
How can I apply for Down Payment Assistance?
To start the down payment assistance process, the application is the very first step! This application will get you ready for both your home loan, and the down payment assistance (two different programs).
Get in touch with us to kick things off!
Can you get assistance with an FHA Loan?
Yes, you certainly can! Treadstone has a variety of down payment assistance programs available in combination with FHA loans. You’ll need to check your eligibility for those programs and loan types with your Loan Officer!
How Long Does It Take to Get Down Payment Assistance?
Getting down payment assistance shouldn’t add much time to the rest of your home-buying process. You may be required to take a valuable educational course at a time of your choosing.
What is the down payment for a home in Michigan?
With a USDA loan or a VA loans your down payment can be as little as 0%! With Conventional loans, you may be able to utilize a 3% down payment, while FHA loans may be able to utilize a 3.5% down payment.