What MSHDA down payment assistance actually is
MSHDA down payment assistance is a second loan from the Michigan State Housing Development Authority that covers some or all of your down payment, closing costs and prepaid items when you buy a home in Michigan. The current version is called the MI 10K DPA Loan. It is available statewide, it carries no interest, and it has no monthly payment. You do not pay it back until you sell the home, refinance, pay off the first mortgage, or stop living in the house as your primary residence.
Here is the part people miss: the assistance is not a standalone grant you apply for at a state office. It rides on top of an MSHDA first mortgage called the MI Home Loan, and both pieces come through a participating lender like me. If you want the assistance, you start by getting pre-approved for the MI Home Loan, and the down payment help is layered in as part of the same file.
The two pieces: MI Home Loan plus MI 10K DPA Loan
Think of it as one package with two parts.
- The MI Home Loan is your main mortgage. It is a thirty-year fixed-rate loan, and underneath the MSHDA label it is still a conventional, FHA, VA or USDA Rural Development loan. That matters because the underwriting rules of that underlying program still apply to you.
- The MI 10K DPA Loan is the second loan recorded behind the first. MSHDA describes it as an interest-free loan that can be used for down payment, closing costs and prepaid expenses. The amount in the program name is the maximum; what you receive is based on what the transaction actually needs.
You cannot take the MI 10K DPA Loan with a non-MSHDA first mortgage. If a different loan turns out to be the better fit for you, the assistance does not come along. That is why I compare the MSHDA package against a plain FHA or conventional loan for every buyer who asks about it.
Who qualifies, in plain terms
MSHDA publishes the rules, and they change from time to time, so treat this as the shape of the program rather than the fine print. I will check the current limits against your actual situation.
First-time buyer status
Statewide, the MI Home Loan is for first-time buyers, which MSHDA defines as someone who has not owned a home in the previous three years. If you owned a house years ago, sold it, and have been renting since, you may count as first-time again. In MSHDA's targeted areas, repeat buyers are allowed too. Parts of West Michigan fall in targeted areas, so if you have owned before, do not rule yourself out until we look up the address.
Income limits
Household income limits apply, and they vary by county and by the number of people in your household. The limits are higher than many people expect. Buyers with steady, middle-of-the-road incomes in Kent County often fit. Income is counted for the household, not just the people on the loan, so tell me about everyone who will live in the home.
Sales price limit
There is a statewide cap on the purchase price. It sits well above the typical first-home price in Grand Rapids, Rockford and the surrounding towns, so it rarely gets in the way of a first purchase here.
Credit score
MSHDA sets a minimum credit score, and the underlying loan program (FHA, conventional and so on) has its own standards that also have to be met. If you are close to the line, there are usually things we can do in the months before you buy. I wrote about that in the guide to getting pre-approved for a mortgage in Michigan.
Homebuyer education
Everyone on the loan must complete a homebuyer education course and bring the certificate to closing. MSHDA keeps a locator for approved classes, and several can be done online in an evening or two. I tell buyers to knock this out early, right after pre-approval, so it never holds up a closing date.
Property and occupancy
The home has to be in Michigan and it has to be your primary residence. You cannot use this on a rental property or a second home.
How repayment works
This is the question I get most often, so here is the straight answer. The MI 10K DPA Loan is deferred. Nothing is due month to month and no interest accrues. The balance comes due when one of these things happens:
- You sell the home.
- You refinance the first mortgage.
- You pay off the first mortgage.
- The home stops being your primary residence.
In a normal sale, the assistance is simply paid back out of your proceeds at the closing table, the same way the first mortgage is. Because it does not grow, what you repay is what you borrowed. It is a loan, not a gift, and it is not forgiven over time. Plan for it the way you would plan for any lien on the house.
The refinance trigger deserves a second look. If rates move lower a few years from now and you want to refinance, the DPA balance will need to be handled as part of that refinance. That is not a reason to skip the program; it is a reason to know it going in.
What it does and does not cover
| Cost at closing | Can the MI 10K DPA Loan pay it? |
|---|---|
| Down payment required by your loan program | Yes |
| Lender and title closing costs | Yes |
| Prepaid interest, taxes and insurance for your escrow account | Yes |
| Earnest money deposit | You pay this up front; it is credited back to you at closing |
| Home inspection fee | No, this is paid out of pocket when the inspection happens |
| Moving costs, furniture, repairs after closing | No |
MSHDA also notes that maximum financing is not required. In practice that means you can bring some of your own money and use the assistance to fill the gap, rather than being forced to borrow the full amount. Seller concessions and gift funds from family can usually stack with it as well, within the rules of the underlying loan program.
How to apply, step by step
- Call or message an MSHDA-approved lender. Mortgage 1 is a participating lender, and I handle these files regularly. You do not contact MSHDA directly for the loan.
- Get pre-approved for the MI Home Loan. I will pull credit, review income and assets, and check the household against the current income and sales price limits for the county you want to buy in. The documents are the same as any mortgage: pay stubs, two years of W-2s or tax returns, bank statements and photo ID.
- Take the homebuyer education class. Do this right away so the certificate is ready.
- Shop with a realistic budget. Your pre-approval letter will reflect the full package, so sellers see a buyer who is ready to close.
- Go under contract and send me the purchase agreement. We lock the rate, order the appraisal, and I submit the file to MSHDA for their review alongside our underwriting.
- Close. At closing you sign the first mortgage and the DPA second mortgage. The assistance funds are applied directly to your costs on the settlement statement.
MSHDA's review adds a little time compared with a plain FHA or conventional loan, so I like a closing date at least thirty days out from the accepted offer. If your agent is pushing a faster close, tell me before you sign so we can set expectations with the seller.
Is it the right move for you?
MSHDA down payment assistance is a strong fit when the thing standing between you and a house is cash at closing rather than monthly budget. It is less compelling if you already have the down payment saved and you expect to sell or refinance within a few years, because you would be taking on a second lien you will have to settle soon anyway. For a broader look at every option, including city programs and the state's first-time buyer savings account, see my guide to first time home buyer programs in Michigan.
Eligibility always depends on the full application, and the program rules can change. I would rather spend twenty minutes running your numbers than have you guess.
What to do this week
- Pull your free credit reports and look for errors. Fixing a mistake takes weeks, so start now.
- Write down everyone who will live in the home and their income, because MSHDA counts household income.
- Gather your last two pay stubs, your most recent W-2s and two months of bank statements.
- Pick a homebuyer education class from MSHDA's locator and schedule it.
- Reach out and tell me the town or county you are shopping in. I will check the current limits and tell you honestly whether the MSHDA package or a different loan puts you in a better spot.