Michigan First-Time Home Buyer: 2022 Programs and Grants

What to know about buying a house in Michigan

As a Michigan first-time home buyer, you can access free advice, counseling, and some special mortgage programs. Better yet, you may be able to get cash assistance to bridge the gap between your savings and your down payment and closing costs needs. Here’s how to get started.

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Michigan home buyer overview

The average home sale price in the state of Michigan was $263,220 in April 2022, according to data from Michigan Realtors. That was a 10% increase over the same month in 2021.

Although some other states have seen faster home price growth, such a large hike can pose problems for Michigan first-time home buyers. It’s hard enough to save for a down payment even when prices are stable. So read on to learn about cash assistance that might top up your savings.

Michigan home buyer stats

Average Home Sale Price in MI1 $263,220
Minimum Down Payment in MI (3%) $7,900
20% Down Payment in MI $52,640
Average Credit Score in MI2 719
Maximum MI Home Buyer Grant3 Up to $14,000 loan forgivable after 5 years (Warren only)

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Michigan

If you’re a first-time home buyer in Michigan with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

  • Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
  • FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
  • VA loan: Only for veterans, active military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
  • USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Buyers must meet income limits, too, which vary by location and household size. Low mortgage insurance rates
  • MSHDA loan: May include competitive interest rates and can be used with down payment and closing cost assistance programs. More information below

Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

Michigan first-time home buyer programs

The Michigan State Housing Development Authority (MSHDA) recently eliminated its popular MI Home Loan Flex program. But first-time buyers are still able to take advantage of the MI Home Loan, which will finance loan amounts of up to $224,500.

Michigan first-time home buyers will need at least 3% down for the MI Home Loan, but MSHDA does offer down payment assistance.

To qualify, you’ll have to meet basic lending criteria as well as a few special rules set by the MSHDA:

You may also be eligible for a mortgage credit certificate (MCC) that can provide savings in the form of a tax credit on your federal taxes, perhaps for the lifetime of your loan.

Michigan first-time home buyer grants

The MSHDA offers down payment assistance loans rather than grants. This assistance comes in the form of a second mortgage that charges 0% interest and requires no monthly payments. You simply pay back the amount you borrowed when you sell the home, refinance, transfer, or finally pay off your mortgage in full.

  • MI DPA Loan Program: You can borrow $7,500 under this program anywhere in Michigan. And that’s more than the average 3% down payment in the state
  • MI 10K DPA Loan Program: If you’re lucky enough to be buying in one of 236 ZIP codes and are using an MI Home Loan, MSHDA offers loan amounts of up to $10,000

There are loads of other down payment assistance programs operating in the Wolverine State. And your city or county may well provide one.

So check out the list below and search for “[your city or county] down payment assistance” online. You need to find out which one is best suited to your needs, whether it’s a state or local program.

Buying a home in Michigan’s major cities

At $80,000, average home prices in Detroit are extraordinarily low by national standards for a major city. By comparison, Grand Rapids (at $239,900) and Warren (at $169,900) are a little closer to the norm but still fairly low.

Detroit first-time home buyers

The median list price in Detroit was $80,000 in April 2022, according to Realtor.com. That was up 6.8% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $2,400 for 3% down payment
  • $16,000 for 20% down payment

As far as home buyer assistance, Detroit City lists “Potential Incentives Available to New or Current Homeowners in Detroit.”

That includes the National Faith down payment assistance program for Wayne County. It says it “provides a fixed $7,500 loan for existing houses. This loan is forgivable after five (5) years at 0% interest.”

So, provided you stay in the home for five years and don’t sell the place or refinance, transfer, or pay down the mortgage in that time, you’ll owe nothing on your down payment loan.

Grand Rapids first-time home buyers

The median list price in Grand Rapids was $239,900 in April 2022, according to Realtor.com. That was up 15.3% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $7,200 for 3% down payment
  • $47,980 for 20% down payment

Grand Rapids’ Homebuyer Assistance Fund (HAF) helps residents achieve their dreams of homeownership by providing up to $7,500 for low- and moderate-income homebuyers. Buyers can use the money toward their down payment, closing costs, and prepaid expenses. Click the link for conditions.

The website says you have to remain in the home for five years. But it doesn’t spell out what happens when that time’s up. Is the loan forgiven? Or is the debt repayable sometime after that? Call (616) 456-3677 or email [email protected] to find out.

Warren first-time home buyers

The median list price in Warren was $169,900 in April 2022, according to Realtor.com. That was up 6.3% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $5,100 for 3% down payment
  • $33,980 for 20% down payment

The City of Warren Direct Homebuyer Assistance program says, “The City will provide half of the required down payment and up to $2,500 in closing costs (which includes prepaid taxes and interest) for a total not to exceed $14,000 per eligible household based on need.”

Provided you’re a responsible homeowner and remain in residence for five years, your whole down payment loan will be forgiven after those five years are up. Click the link for all the conditions.

That’s the best deal we’ve found in Michigan: A loan amount of up to $14,000 that’s forgiven after five years. It certainly beats the MSHDA’s home mortgage offer.

Where to find home buying help in Michigan

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Michigan or their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.

Statewide and regional first-time buyer programs in Michigan

You can see a list of Michigan first-time home buyer resources by city and town on HUD’s website.

What are today’s mortgage rates in Michigan?

You can see today’s live mortgage rates in Michigan here.

Experiment with a mortgage calculator to see how down payment, interest rate, property taxes, and homeowners insurance affect your monthly mortgage payment.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

1Source: Michigan Realtors Housing Sales Statistics Report

2Source: Experian.com study of 2021 and 2020 data

3Based on a review of the state’s available DPA grants at the time this was written

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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