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HL1Housing Living 101

Michigan Down Payment Help Through MSHDA

By Tanika Patel
7 minute read

What MSHDA Down Payment Assistance Covers

MSHDA — the Michigan State Housing Development Authority — runs down payment and closing cost programs for first-time homebuyers in Michigan. The money comes as a grant or forgivable loan, meaning you do not repay it if you stay in the home for a set period, usually five to ten years. MSHDA does not lend you the mortgage itself; instead, it covers part of what you owe upfront so you need less cash out of pocket.

The amount varies by program and your income. Some programs cover up to 5 percent of the home purchase price; others go higher. You must use the money for down payment, closing costs, or both — not for repairs or other expenses after closing. The home must be in Michigan, and you must be a first-time buyer, though MSHDA defines that term broadly: you may have owned a home before if you have not owned one in the past three years.

Key Takeaways

  • MSHDA down payment programs are grants or forgivable loans, not money you repay if you keep the home for five to ten years.
  • You must work with a MSHDA-approved lender and a HUD-certified homebuyer counselor to move forward.
  • Income limits apply and vary by family size and county; most programs serve households earning 80 percent of area median income or less.
  • The home purchase price cannot exceed the county limit set by MSHDA, which is lower in rural areas and higher near Detroit and Grand Rapids.
  • You start by contacting an approved lender or a local housing counselor, not MSHDA directly.

MSHDA Programs Currently Available

MSHDA runs several programs, and which ones are open depends on funding. The Home Loan Program is the main mortgage product; it offers a low interest rate and allows down payments as low as 3 percent, with MSHDA covering part of that. The Homebuyer Assistance Fund (HAF) covers down payment and closing costs on top of any mortgage, and it is often the fastest route if you already have a lender lined up.

A third option, the Hardest Hit Fund (HHF), targets homeowners in financial distress — it is less common now but may still be available depending on your situation. MSHDA also partners with the federal Community Development Block Grant (CDBG) program, which some cities and counties use to fund down payment help locally. Check the MSHDA website or call your county housing authority to learn which programs have funding open right now, because availability changes throughout the year.

Income and Purchase Price Limits

Every MSHDA program has an income ceiling. Most programs serve households earning no more than 80 percent of the area median income (AMI) for your county. A family of four in Wayne County has a different limit than a family of four in Marquette County. MSHDA publishes these limits by county on its website, and they update each year in April.

The home purchase price also has a cap, set by county. In rural counties, the limit might be $200,000 to $250,000. In higher-cost areas like Oakland or Macomb counties, it may reach $350,000 or more. If the home you want to buy exceeds the county limit, you cannot use MSHDA funds for that purchase. Your lender can tell you the current limits for your county and confirm whether a specific property qualifies.

How to Start: Working With an Approved Lender

You do not contact MSHDA directly to begin. Instead, you find a MSHDA-approved lender — a bank, credit union, or mortgage company that participates in the program. Your own bank may be approved; if not, MSHDA's website lists all participating lenders by region. When you call a lender, tell them you are interested in MSHDA down payment help, and they will walk you through their process.

The lender will order a credit check and verify your income, employment, and assets. They will also require you to complete homebuyer counseling with a HUD-certified counselor — this is not optional. Counseling covers budgeting, credit, the mortgage process, and what to expect as a homeowner. Many counselors offer it for free or low cost, and some lenders have counselors on staff or can refer you. Once counseling is done and your finances check out, the lender submits your MSHDA application.

The Homebuyer Counseling Requirement

Before MSHDA will approve your down payment funds, you must complete a homebuyer education course with a counselor certified by the U.S. Department of Housing and Urban Development (HUD). This is not a sales pitch or a quick online quiz — it is a structured course, usually one to two days long or spread across several sessions, covering your credit score, debt-to-income ratio, property taxes, homeowners insurance, and what happens if you fall behind on payments.

You can find HUD-certified counselors through the HUD Housing Counseling Locator on HUD's website, or ask your lender for a referral. Some nonprofits and local housing authorities offer counseling for free; others charge $50 to $150. The counselor gives you a certificate when you finish, and you provide that to your lender as proof. Without it, your MSHDA application will not move forward.

Timeline and What Happens After Approval

From the time you submit a complete MSHDA application to approval typically takes two to four weeks, though it can be longer if documents are missing or if the program is processing a high volume. Your lender handles most of the back-and-forth with MSHDA; you mainly provide documents when asked. Once MSHDA approves the down payment funds, the money does not go to you — it goes directly to the title company or escrow agent at closing, where it is applied to your down payment and closing costs.

After closing, you own the home and begin making mortgage payments. If your MSHDA assistance was a forgivable loan, the loan is forgiven if you live in the home for the required period (usually five to ten years, depending on the program). If you sell or move before that period ends, you may owe back some or all of the assistance, though the exact amount depends on the program terms. Your lender and closing attorney will explain the forgiveness timeline in writing before you sign.

What to Do If You Do Not may have access to or Funds Are Closed

If your income is too high or the home price exceeds the county limit, you do not may have access to for MSHDA. In that case, explore other options: some employers offer down payment help, some nonprofits run local programs, and some lenders have their own down payment assistance products. Ask your lender what else might be available.

If a program you want is temporarily closed because funding ran out, it usually reopens later in the year or the next year. MSHDA publishes a calendar of when programs typically reopen. You can also ask your lender or local housing authority to put you on a waiting list or notify you when funds become available again. In the meantime, save more cash, work on your credit score, or look at homes in a lower price range to improve your chances when the program reopens.

Frequently Asked Questions

Do I have to use an MSHDA lender, or can I use my own bank?

Your bank must be MSHDA-approved to offer the program. If your bank does not participate, you will need to work with one that does. You can still keep your existing banking relationship for other accounts; you just use an approved lender for the mortgage and down payment assistance.

What if I have bad credit or a low credit score?

MSHDA does not have a published minimum credit score, but most lenders require a score of at least 580 to 620. If your score is lower, work with a credit counselor to improve it before applying. Paying down debt, correcting errors on your credit report, and making on-time payments for several months can raise your score enough to may have access to.

Can I use MSHDA funds if I am buying with a co-buyer or spouse?

Yes. Both of you must meet the first-time buyer definition and income limits, and both must complete homebuyer counseling. Your combined household income is what MSHDA uses to determine if you may have access to.

What happens to my MSHDA loan if I refinance my mortgage?

If your MSHDA assistance was a forgivable loan and you refinance before the forgiveness period ends, you typically owe back the full amount or a portion of it. The exact terms depend on your program. Ask your lender and closing attorney about this before you refinance, because it can change the math on whether refinancing makes sense.

Can I use MSHDA funds to buy a mobile home or condo?

MSHDA programs generally cover single-family homes, townhouses, and some condos. Mobile homes are usually not may be able to access. Ask your lender whether the specific property type you are interested in qualifies under the program you are considering.