First-Time Homebuyer Programs in Michigan

The down payment on a new home is often the biggest hurdle for first-time homebuyers. In Michigan, with an average home value of $247,638, you would need $49,528 to avoid private mortgage insurance.

Fortunately, there are first-time homebuyer programs available in Michigan to help you achieve homeownership and mortgages that allow buyers to put less down on a home, but these usually have income requirements and need mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

We have compiled the first-time homebuyer programs the Michigan State Housing Development Authority (MSHDA) offers to help you find the best option for your particular needs and situation.

The MI Home Loan program, offered by the Michigan State Housing Development Authority, provides affordable mortgage options to first-time homebuyers statewide and repeat buyers in targeted areas. The loan has a maximum purchase price of $224,500 and offers up to $10,000 in down payment assistance (DPA) with a required housing education class. The program works through participating lenders across the state.

The Mortgage Credit Certificate (MCC) program provides a federal tax credit to first-time homebuyers and repeat buyers in targeted areas. It allows homeowners to credit 20% of their annual mortgage interest against their tax liability, offering a dollar-for-dollar tax reduction. This credit can be claimed each year for the life of the mortgage, up to 30 years. Note that the maximum sales price for eligible homes is $224,500, and household income limits apply depending on the location and family size.

Aside from statewide first-time homebuyer programs in Michigan, city-specific programs are also available to help you pursue homeownership in your chosen city. Check out the table below for some of the cities in Michigan that provide first-time homebuyer programs for potential residents.

In Michigan, zero-down-payment loan programs allow you to purchase a home without putting any money down. USDA and VA loans are two government-backed options with no down payment required.

USDA loans assist homebuyers in rural areas by providing affordable financing options. They are issued by the U.S. Department of Agriculture under the Rural Development Guaranteed Housing Loan program. These loans cater to individuals and families seeking to purchase a home in designated rural areas, helping them achieve homeownership without the burden of a large down payment.

USDA loans offer several benefits, including no down payment requirement and competitive interest rates, making homeownership more accessible for those in eligible areas. Borrowers can finance up to 100% of the home's appraised value, reducing the upfront costs typically associated with buying a home. These loans also come with fixed interest rates, providing stability and predictability in monthly payments.

To qualify for a USDA loan, the property must be located in a USDA-eligible rural area, typically with a population of less than 35,000 people. The home should also be no larger than 2,000 square feet. Income limits vary by location and are designed to ensure the program serves low- to moderate-income households. For example, in Alpena County, MI, the income limit is $63,700, while in Emmet County, MI, it is $72,000 for a four-person, low-income household. These limits help target assistance to those who need it most, making it crucial for potential borrowers to check the specific income requirements for their area.

VA loans are a beneficial financing option for veterans, active-duty service members and certain members of the National Guard and Reserves. They are issued by the U.S. Department of Veterans Affairs, offering support to those who have served. The primary advantage of VA loans is the ability to purchase a home without a down payment. They also do not require private mortgage insurance (PMI), which can significantly reduce monthly payments. Furthermore, VA loans often come with lower interest rates than private loans.

As of November 2024, the APR for a 15-year fixed-rate VA loan in Michigan is 6.15%, while a 30-year fixed-rate VA loan is 6.38%. Your length of service, duty status and character of service determine eligibility for VA loans. Additionally, you must meet certain income limits based on your location and obtain a valid Certificate of Eligibility (COE).

First-time homebuyers in Michigan can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, making them accessible for many homebuyers. In contrast, conventional loans may require as low as 3% down payment for first-time homebuyers but typically have stricter credit score and debt-to-income ratio requirements.

As of November 2024, the APR for a 15-year fixed-rate conforming loan in Michigan is 6.01%, while the APR for a 15-year fixed-rate FHA loan is 8.48%. FHA loans can have higher APRs due to the additional costs of borrowing money on government-backed loans.

Use our FHA vs. conventional loan calculator below to compare both mortgage programs and determine the best option for you.

We answered frequently asked questions about first-time homebuyer programs in Michigan to help you explore your options and move closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Michigan to help you with the homebuying process.