What is a DPA?
Down payment assistance is meant to assist a home buyer with not only the down payment but also the other costs associated with purchasing a home including mortgage closing costs, prepaid interest, setting up an escrow, paying for the first year of homeowners insurance and returning any prepaid property taxes to the seller.
What are the different Down Payment Assistance (DPA) programs?
MSHDA offers three different DPA’s, each serving a different type of homebuyer and different goals of how to promote homeownership in the State of Michigan.
MI HOME LOAN – the most accessible of all the MSHDA DPA’s is the MI HOME LOAN. This program is available throughout the State of Michigan and provides up to $7,500 in down payment assistance.
MI HOME LOAN FLEX – Much like the MI HOME LOAN, this program offers up to $7,500 in down payment assistance but allows for repeat homeowners and the exclusion of household members from the mortgage.
MI 10K DPA – This is the most recent addition to MSHDA’s DPA lineup. This program is limited to 236 Zip Codes in the State of Michigan but provides up to $10,000 in down payment assistance.
How do the MSHDA DPAs work?
MSHDA, through its DPA programs, provides a 2nd mortgage that must be repaid upon the sale of the home. This 2nd mortgage is 0% interest and never requires a monthly payment. Essentially, you get to use the State’s money interest free for as long as you live in the home. The first mortgage will be either a conventional mortgage, FHA or USDA’s Rural Development (RD) program.
Are there any restrictions to MSHDA DPA’s?
MSHDA does put a few restrictions, or overlays, on its DPA programs.
These restrictions include:
- Requiring that you have a 640 or higher credit score for the MI HOME LOAN and MI 10K DPA and a 660 for the MI HOME LOAN FLEX program.
- Limiting total household income based on the county the home is located in and the household size.
- A cap on the sales price of the home being purchased at $224,500
- Requiring that your total debt to income ratio not exceed $45%
- Limiting the buyer’s total liquid assets to $20,000
Does MSHDA require a homebuyer education class?
MSHDA has found that a homebuyer education class is very beneficial for first time homebuyers and does require completion of a homebuyer’s education class. There are several options available, both online and in person. Some are free and others have a cost. Click here for a list of options.
How will I know if I am eligible for the MSHDA DPA programs?
This part is easy. The first step is to get pre-approved for the mortgage. Your approval will look at many factors set by the underwriting guidelines of MSHDA and the underwriting guidelines of the either Fannie Mae’s, FHA or USDA’s Rural Development (RD). You can get a FREE mortgage pre-approval for this program in as little as 10 minutes using The Mortgage 1 Team’s Mortgage in a SNAP. Click here for your FREE mortgage pre-approval.