MSHDA down payment assistance comes through Michigan State Housing Development Authority, and you apply directly to them or through a lender they work with

Michigan State Housing Development Authority (MSHDA) runs several programs that help first-time homebuyers cover down payments and closing costs. The main one is the Homebuyer Assistance Mortgage (HAM) Loan Program, which provides a second mortgage you don't have to repay if you stay in the home for a set period. You apply through MSHDA's website or through a participating lender — some lenders can process the application faster because they're already set up in the system.

The amount you can borrow depends on the purchase price of the home and which county you're buying in. MSHDA publishes maximum loan amounts by county each year, and they change. You'll need to know your target home price before you apply, because the program calculates your assistance based on that number.

The process takes roughly 30 to 45 days from application to closing, though it can be faster if your lender is experienced with MSHDA loans. The program requires you to complete a homebuyer education course before closing — this is non-negotiable and typically takes 4 to 8 hours, either in person or online.

Key Takeaways

  • MSHDA's HAM Loan Program provides a second mortgage for down payment and closing costs that you don't repay if you stay in the home for 10 years.
  • You apply through MSHDA directly at mshda.org or through a lender that participates in the program, and the lender route is often faster.
  • You must complete a homebuyer education course before closing, and MSHDA has a list of approved providers on their website.
  • Maximum loan amounts vary by county and are published annually on MSHDA's website — check your county before you start the process.
  • You need a purchase agreement signed by both you and the seller before MSHDA will process your application.

What documents you need before you start

Gather these before you contact MSHDA or a lender: a signed purchase agreement showing the sale price and your name as the buyer, proof of income (recent pay stubs, tax returns, or both depending on your employment type), a list of your debts and monthly payments, and your Social Security number. If you're self-employed, bring two years of tax returns and possibly a profit-and-loss statement.

You'll also need proof of funds for any down payment you're putting in yourself — MSHDA requires you to contribute something, usually at least 1 to 3 percent of the purchase price depending on the program. This can come from savings, a gift from a family member (with a signed gift letter), or a combination. MSHDA will ask for bank statements showing the money has been in your account for at least two months, or a gift letter plus the donor's bank statement if someone is giving you the money.

Have your credit score ready. MSHDA doesn't publish a minimum, but most lenders working with the program want a score of 620 or higher. If your score is lower, you may still be able to work with MSHDA, but your options narrow and you'll need to explain any negative marks on your report.

How to apply through MSHDA directly

Go to mshda.org and look for the Homebuyer Assistance Mortgage section. You'll find an online application form and a list of approved homebuyer education providers. Complete the application with your personal information, income, debts, and the details of the home you're buying (address and purchase price). Submit it electronically.

MSHDA will contact you within a few business days to confirm receipt and tell you what happens next. They may ask for additional documents — this is normal. Respond quickly because delays here slow down your whole timeline. Once MSHDA approves you in principle, they'll issue a commitment letter that you give to your lender.

If you're applying directly to MSHDA rather than through a lender, you'll need to find a lender yourself to originate the first mortgage. MSHDA doesn't lend the primary mortgage; they only provide the second mortgage for down payment help. Some lenders are more familiar with MSHDA loans than others, so ask your real estate agent or MSHDA for a referral.

How to apply through a participating lender

This route is usually faster because the lender handles the MSHDA application as part of your mortgage process. Ask your lender upfront whether they participate in MSHDA programs — not all do. If they do, tell them you want to use MSHDA assistance, and they'll include it in your mortgage application.

The lender will submit your MSHDA application on your behalf once you've signed the purchase agreement. They'll coordinate with MSHDA to get your commitment letter, and they'll handle most of the back-and-forth. Your job is to respond quickly when either the lender or MSHDA asks for documents, and to complete your homebuyer education course on time.

Working through a lender means one point of contact instead of juggling two applications. However, make sure the lender explains the MSHDA terms clearly — the forgiveness period, the interest rate on the second mortgage, and what happens if you sell the home before the forgiveness period ends.

The homebuyer education course requirement

MSHDA requires all borrowers to complete an approved homebuyer education course before closing. You can take it online or in person, and it typically covers budgeting, credit, the home buying process, and homeownership responsibilities. Most courses take 4 to 8 hours and cost between $0 and $100, depending on the provider.

MSHDA publishes the list of approved providers on their website. Some are nonprofits that offer free or low-cost courses; others charge a fee. You can take the course before you apply or after MSHDA approves you, but you must have the completion certificate before closing. Plan to take it early so it doesn't become a bottleneck at the end.

After you complete the course, the provider sends your certificate directly to MSHDA or to your lender — you don't have to do anything. Confirm with the provider that they've sent it, because if MSHDA doesn't have it on file, your closing will be delayed.

What happens after MSHDA approves you

MSHDA issues a commitment letter stating how much assistance you're receiving and the terms of the second mortgage. This letter goes to your lender, who uses it to finalize your loan package. Your lender will order an appraisal of the home, a title search, and a homeowners insurance quote. These take 1 to 2 weeks.

Once your lender has everything, they'll schedule a closing meeting with you, the seller, the real estate agent, and a title company representative. At closing, you'll sign the mortgage documents for both the first mortgage (from your lender) and the second mortgage (from MSHDA). The second mortgage is a real loan with an interest rate and monthly payment, but it's forgiven if you stay in the home for 10 years and keep making payments on time.

After closing, the lender funds the first mortgage and MSHDA funds the second mortgage. The money goes to the seller through the title company, and you receive the keys. The whole process from signed purchase agreement to closing typically takes 30 to 45 days.

What disqualifies you or slows down the process

MSHDA will deny your application if you've owned a home in the past three years — the program is for first-time buyers only. They define first-time buyer as someone who hasn't owned a primary residence in the three years before applying. If you owned a home longer ago, you may still may have access to.

A very low credit score (below 580) makes approval unlikely, though not impossible. Recent bankruptcy, foreclosure, or a pattern of late payments raises red flags. MSHDA will ask you to explain these items in writing. Honesty and a clear explanation of what changed help more than silence.

Income limits vary by county and family size. MSHDA publishes these on their website. If your income exceeds the limit for your area, you won't may have access to. Debt-to-income ratio also matters — if your monthly debt payments (including the new mortgage) exceed 43 to 50 percent of your gross monthly income, approval becomes harder. Some lenders are stricter than others on this point.

Frequently Asked Questions

Can I use MSHDA assistance if I'm buying with a co-borrower?

Yes. Both borrowers must meet MSHDA's requirements, and both must complete the homebuyer education course. If one borrower has owned a home in the past three years, you won't may have access to. Income and debt are calculated for both of you combined.

What's the interest rate on the MSHDA second mortgage?

MSHDA sets the rate, and it changes monthly. Check their website or ask your lender for the current rate. It's typically lower than a standard second mortgage because MSHDA is a state program, not a commercial lender. The rate is fixed for the life of the loan.

What happens if I sell the home before 10 years?

You'll owe back the full amount of the MSHDA loan from the sale proceeds. If you sell for a profit, this usually isn't a problem — the money comes out at closing. If you sell at a loss, you may owe money out of pocket, depending on how much you borrowed.

Can I pay off the MSHDA loan early?

Yes, and there's no penalty for early repayment. However, if you pay it off before 10 years, you lose the forgiveness benefit. Many borrowers keep the loan open for the full 10 years to get the forgiveness, then pay it off or refinance.

What if MSHDA denies my application?

MSHDA will tell you why in writing. Common reasons are income too high, credit score too low, or owned a home recently. You can ask MSHDA to reconsider if you believe there's an error, or you can explore other down payment assistance programs through your lender or local housing nonprofits.