First-time Home Buyer Guide for Michigan

Felicia Oliver

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Felicia Oliver

April 14th, 2022
Updated April 14th, 2022

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Home buyer requirements | Programs in Michigan | Low-income assistance | Disabled assistance | The home-buying process | FAQs

First-time home buyers in Michigan can access many great programs to get a variety of help:

The state offers programs through the Michigan State Housing Development Authority (MSHDA). Some larger cities, like Detroit, Warren, and Grand Rapids, and counties like Wayne County (home of Detroit), have programs to assist first-time home buyers in their respective areas. Federal government programs are available to assist as well.

🏡 Housing market in Michigan

🌡 It's a neutral market. There aren't a ton of homes, so buyers have time to weigh their options. Bidding wars are unlikely to be a factor.

📈 Property values are rising. In 2022, home values in Michigan will grow by 8.2%. Buying now likely means you'll get a good return on your investment.

📈 Mortgage rates are rising. In Michigan, mortgage rates average 4.99000% for a 15-year mortgage and 5.59000% for a 30-year mortgage. The national average for a 30-year mortgage is 5.46000%

» JUMP: What are first-time home buyer programs in Michigan?

What are first-time home buyer requirements in Michigan?

Finances | Credit score | Debt-to-income (DTI) ratio | Residency

A first-time home buyer in Michigan is someone who has never purchased a home as their principal residence, or hasn't owned a home in the last three years.

According to the U.S. Department of Housing and Urban Development (HUD), here are some other people who can be first-time home buyers:

  • An individual who has never owned a principal residence, even if their spouse was a homeowner
  • Any single parent who owned a home with their ex-spouse
  • A displaced homemakerwho only owned property with their spouse

Michigan State Housing Development Authority (MSHDA) programs are available to all first-time home buyers, as long as the property you want to purchase is within Michigan.

First-time home buyers in Michigan can also qualify for federal programs available from HUD, the Federal Housing Administration (FHA), the Veterans Administration (VA), and the U.S. Department of Agriculture (USDA).

What shape do my finances need to be in?

Most first-time home-buyer programs have minimum financial qualifications that you'll need to meet, including a minimum credit scoreand maximum total debt-to-income ratio (DTI).

For MSHDA programs, 640 is the minimum credit score required. For its MI Flex Loan, it's 660.

The maximum DTI for MSHDA programs is 45%. FHA loans can allow a DTI as high as 57% under certain conditions. Conventional loans, which aren't backed by the government, typically require a DTI below 36%.

You’ll also need enough income to afford your monthly mortgage payments. And you’ll likely need to have money saved to make a down payment on the home, and later to address home maintenance issues.

Income maximums for Michigan programs

Under the MSHDA program, the maximum household income allowed is $139,720 (in Livingston County).

Income to qualify for MSHDA programs varies depending on the number of people in the household and whether the area where the home purchase takes place is a “targeted” or “non-targeted” property area. The federal government has designated certain areas as “targeted areas'' to attract homeowners.

For targeted cities in Wayne County — Dearborn, Detroit, Ecorse, Hamtramck, Highland Park, Inkster, Lincoln Park, River Rouge, and Taylor — the income maximum for a family of three or more is $112,000. The remainder of Wayne County, which is non-targeted, has a maximum of $92,000.

For targeted areas in Livingston County, the maximum income for a family of three or more is $139,720. For non-targeted areas in Livingston county, the maximum income for that household size income is $114,770.

Here's a county by county breakdown of MSHDA income maximums.

Purchase price maximums for MSHDA programs

The home purchase price cap for all MSHDA programs is $224,500. Although it's not a financial qualification, it's good to know how much house you can buy under this program.

💸 How much money you need to buy a median-priced home in Michigan

Based on the median home price in Michigan of $226,000, you'll need $6,780–45,200 for your down payment (3–20% of the home's price).

Home buyers also typically have to pay 3–6% of a home's price in closing costs. Unless you qualify for a loan or grant to cover these costs, you would be on the hook for $6,780–13,560 out of pocket.

Once you buy your home, your monthly mortgage payment will vary based on your loan amount and interest rate.

For a $226,000 home bought with a 3% down payment (30-year loan of $219,220, 4.25% interest rate) expect to pay around than $1,100 a month, plus property taxes and private mortgage insurance.

Last, homeowners in Michigan spend an average of $2,065 in maintenance costs annually, but this can vary based on the house. To be prepared, set aside 1% of the house's value each year for repairs.

What credit score does a first-time home buyer need?

The minimum credit score allowed for Michigan State Housing Development Authority (MSHDA) programs is 640. For its MI Flex Loan, it's 660.

The minimum credit score required for federal government programs from HUD, the FHA, and VA is 580. The minimum score for the USDA program is 620. If your credit score is below the minimum, learn how you can fix your credit score in six months.

🤓 Credit scores: The higher, the better

A higher credit score could result in lower mortgage interest rates, which could mean lower monthly payments — and a lot of money saved over the course of your loan.

What debt-to-income ratio (DTI) does a first-time home buyer generally need?

For MSHDA programs, the maximum total DTI is 45%. FHA loans can allow DTIs as high as 57% under certain conditions. Conventional loans, which aren't backed by the government, typically require a DTI of 36%.

Lenders evaluate a borrower's debt-to-income ratio to prevent the borrower from taking on too much debt and defaulting on their loans. Typically, lenders want your DTI to be 36–43% of your gross income.

To calculate your DTI, add all of your recurring monthly debt payments, plus your estimated mortgage payment, and divide it by your gross monthly income (before taxes).

» READ: How to Find High DTI Mortgage Lenders

Residency requirements

Although you don't have to be a current resident of Michigan to qualify for MSHDA's programs, you do have to live in the home being purchased.

Individual Michigan counties and municipalities will likely require you to purchase homes within their boundaries.

Federal programs offered by HUD, USDA, and VA are for all home buyers, regardless of where they live or decide to purchase.

What are first-time home buyer programs in Michigan?

Michigan offers first-time home buyers:

  • Down payment and closing cost assistance
  • Lower mortgage interest rates
  • Mortgage credit certificates (MCCs)

The Michigan State Housing Development Authority (MSHDA) requires that home buyers complete educational courses to qualify for down payment and closing assistance.

With so many different home buyer programs out there, it might be hard to choose which one is best for you. However, an experienced real estate agent can help you sort through your options.

» FIND: Top Real Estate Agents in Michigan (2022 Rankings)

For a quick comparison of options, refer to the table below.

First-time home buyer program comparisons

Loan type
Down payment/closing cost assistance
Minimum credit score
Best for…
MI Home Loan Mortgage
MI DPA Loan
MI DPA Loan up to $7,500 available statewide. Can be used for closing costs. Home buyer education required.
640. Or 660 for multiple-section manufactured homes.
First-time home buyers statewide and repeat home buyers in targeted areas.
MI Home Loan Mortgage
MI 10K DPA
MI 10K DPA Loan up to $10,000 available in 236 zip codes. Several are in Wayne County. Home buyer education required. Can be used for closing costs.
Middle credit score (of the three credit scoring entities: Equifax, TransUnion, Experian) of 640 or higher; 660 for manufactured homes.
First-time home buyers statewide and repeat home buyers in targeted areas.
MI Home Loan Flex Mortgage
Down payment assistance up to $7,500. Home buyer education required. Can be used for closing costs.
660
Available to first-time and repeat home buyers looking for a more flexible loan.
Wayne County’s HOME Investment Partnerships Program
$5,000 loan for an existing property; $10,000 for a newly constructed home.
Not specified
Low- and moderate-income families who want to buy a home in Wayne County.
Detroit Home Restoration and Acquisition Program
Up to $15,000; Detroit Public School employees may qualify for up to $20,000.
Not specified
Home buyers in Detroit who are interested in buying and renovating or repairing a property.
Grand Rapids Homebuyer Assistance Fund
Up to $7,500
Set by the lender, who must pre-approve you before you're eligible for this program.
Low- and moderate-income buyers interested in purchasing a home within Grand Rapids.

City of Warren
Half of the required down payment and up to $2,500 in closing costs for a total not to exceed $14,000 per eligible household. Based on need.
No minimum. You're eligible if you meet the maximum income requirement of $80,600.
Low- and moderate-income buyers looking to purchase in Warren.
Federal Housing Administration (FHA) loans
3.5%+
10%+
580+
<580
Borrowers with poor credit history, including first-time buyers and seniors. Lenders may require PMI.
USDA loans
$0
620+
Low- or moderate-income buyers in less populated or rural regions, so long as their income doesn’t exceed 115% of the median household income for their area
Veterans Administration (VA) loans
$0
N/A (620+ recommended)
Veterans and active duty service members, who tend to be offered more competitive interest rates
*A non-amortizing loan needs to be paid back in a single lump sum, not installments.

If you're looking to buy in smaller counties and cities in Michigan, check with those local governments or see HUD’s list of alternative home buyer assistance programs in Michigan.

What are first-time home buyer grant programs in Michigan?

MSHDA doesn't offer assistance in the form of a grant. But several city and county governments in Michigan do have grant programs for home buyers.

Grand Rapids Homebuyer Assistance Fund offers grants up to $7,500 for low- and moderate-income home buyers. Income maximums to qualify are $44,800–84,500, depending on size of household. These limits are updated annually.

Home buyers must be pre-approved for a mortgage from a participating lender. You must be 18 years old and agree to occupy the home — located within Grand Rapids city limits — as your primary residence for at least five years.

You also have to complete an approved home-buyer education course — costing between $25–150 — from one of three education providers:

City of Warren Direct Homebuyer Assistance Program provides a forgivable loan secured by a second mortgage on the home. After you close on your home, the loan payments are deferred and entirely forgiven in five years.

Warren's assistance program is for low- or moderate-income home buyers with a maximum income between $42,750–80,600 (depending on the number of people in the household) purchasing city-owned properties.

Warren provides…
Home buyer provides
  • Half of the required down payment before closing
  • Up to $2,500 in closing costs, including prepaid taxes and interest
  • Half of the down payment after closing
  • Additional closing costs in excess of $2,500

The total amount of assistance cannot exceed $14,000 for each eligible household. Eligible households must have an annual gross household income at or below 80% of the area median income (AMI), adjusted for household size.

You must repay the loan before five years if you don't:

  • Keep the property (i.e., you sell the home with five years)
  • Use the property as a primary residence
  • Maintain the property in a reasonable condition.
  • Make property tax payments
  • Make payments on other loans secured by the property
  • Insure the property against loss

What are first-time home buyer down payment and closing cost assistance programs in Michigan?

MSHDA offers two loan programs that provide down payment and closing cost assistance for first-time home buyers: the MI DPA Loan and the MI 10K DPA Loan.

Buyers must complete a home-buyer education class for both programs. Liquid or cash assets of the home buyers' household can't be over $20,000.

MSHDA down payment and closing cost assistance programs
MI DPA Loan
MI 10K DPA Loan
Amount
Up to $7,500
Up to $10,000
Location
Statewide
Available in 236 zip codes, including Ann Arbor, Detroit, Flint, Grand Rapids, Kalamazoo, Lansing, and Muskegon
Made available with…
  • MSHDA MI First Home
  • MI Flex Home First Loan
  • FHA mortgage
  • USDA Rural Development Guaranteed Mortgage
  • MSHDA MI First Home Loan
  • FHA mortgage
  • USDA Rural Development Guaranteed Mortgage
  • Conventional mortgage
Other details
No cash back; you'll receive only what's needed to cover these expenses
Remainder after down payment and closing costs can be used toward first mortgage. You must contribute 1% of the purchase price.

0%-interest, non-amortizing loan* with no monthly payments; due upon the sale or transfer of the property, or if the first mortgage is refinanced or paid in full

County and local government programs

Wayne County HOME Investment Partnerships Program offers an interest-free, deferred-payment loan that's due once you sell the property.

First-time home buyers can get a loan of $5,000 for an existing home or $10,000 for a newly constructed home. It's for use in 37 participating eligible communities in the county.

To be eligible you must complete homeownership counseling classes, which Wayne County offers through the non-profit National Faith Homebuyers Program.

Detroit Home Restoration and Acquisition Program (HRAP) provides down payment assistance up to $15,000 for the purchase of a home in Hardest Hit Priority Neighborhoods. Detroit public school employees may qualify for up to $20,000.

If you purchase a home from the Detroit Land Bank's auction, you have 24 hours to put 10% down on your winning bid. You'll then have 60–90 days to close and six months to make any necessary repairs.

HRAP assistance is meant to bridge the gap between the cost of repairs to a home that needs renovations and its appraised value. A low appraisal means most lenders will offer less.

Once renovations are complete, the HRAP loan converts to a permanent mortgage based on the home's final value.

You must complete a home buyer's education program sponsored by a HUD-certified housing counseling agency. Here are three local agencies:

Grand Rapids Homebuyer Assistance Fund and the City of Warren Direct Homebuyer Assistance Program also have down payment and closing costs programs. See details in the first-time home buyer programs comparison table above.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

What are first-time mortgage assistance programs in Michigan?

MSHDA's MI Home Loan Mortgage and MI Home Loan Flex Mortgage offer 30-year, fixed-rate mortgages with market or below interest rates. They require a minimum down payment of 3% of the purchase price, and you must contribute at least 1% out of pocket toward the loan amount.

The federal government and some cities and county governments in Michigan offer loans with favorable terms to first-time home buyers as well.

Michigan government mortgage assistance program

This MSHDA loan program is available to first-time home buyers statewide. All home buyers must work directly with a participating lender.

Household income limits apply and can vary depending on family size and property location. Purchase price limit for a home is $224,500 statewide.

MI Home Loan Mortgage is available to first-time home buyers. Minimum credit score required is 640. It's 660 for multiple-section manufactured homes.

MI Home Loan Flex Mortgage is available to first-time and repeat home buyers. The minimum credit score required is 660. Only one adult in the household needs to apply. Outstanding debts don't necessarily need to be paid off for consideration.

Local government programs

Detroit Home Restoration and Acquisition Program (HRAP) mortgage loan allows a home buyer to finance acquisition and repairs to their home.

You must meet these standards to qualify:

This nontraditional mortgage offers home buyers the opportunity to buy a home with a low down payment and flexible underwriting.

The mortgage is an interest-only loan during the repair period and converted to a permanent mortgage based on the final value of the home once repairs are completed.

🤓 What to know about the Detroit Home Mortgage program

The Detroit Home Mortgage program ended October 2021. You may want to contact the banks that participated — Hungtington, Flagstar, and Independent — as they may have other programs of benefit to first-time home buyers.

What are first-time home buyer tax credit programs in Michigan?

The MSHDA mortgage credit certificate (MCC) federal tax credit program lets home buyers credit 20% of their annual mortgage interest against their tax liability. This credit can be claimed every year for the life of the original mortgage. It's available to first-time home buyers statewide.

A tax credit is a dollar-for-dollar reduction in tax liability.

As is the case for all MSHDA loan programs, household income limits can vary depending on family size and property location.

What assistance is available for first-time home buyers in Michigan with low income?

Who qualifies as a low-income home buyer in Michigan?

A low-income home buyer has income less than or equal to 80% of the area median income (AMI) for their specific area.

As an example, for the Detroit-Warren-Livonia metropolitan area, 80% AMI for a two-person household was $62,800 in 2020. For Wayne County, 80% AMI for a two-person household was $51,200 in 2021.

Look up the AMI for the area you want to buy in to see if you qualify as a low-income home buyer.

State programs for first-time buyers with low income

The Michigan State Housing Development Authority (MSHDA) offers ways for low-income families to save money during the home-buying process:

City- and county-level programs for first-time home buyers with low income

Warren's Direct Homebuyer Assistance Program is targeted to low- to middle-income home buyers purchasing city-owned properties in Warren with maximum income between $42,750–80,600, depending on the number of people in the home buyer's household.

Federal programs for first-time home buyers with low income

Fannie Mae’s Home Ready program and Freddie Mac’s Home Possible program both offer mortgages where home buyers can put as little as 3% down. The programs cancel private mortgage insurance (PMI) once the home buyer achieves at least 20% equity in the home.

The U.S. Department of Agriculture offers USDA Direct loans for low-income applicants in rural areas. And the U.S. Department of Veterans Affairs offers favorable mortgages for veterans, active service members, and spouses. Both programs have no down payment requirement and no PMI charge.

What assistance is available for first-time home buyers in Michigan with disabilities?

According to the Americans with Disabilities Act (ADA), a disability is a physical or mental impairment that substantially limits a major life activity.

State programs for first-time home buyers with disabilities

No Michigan-specific programs exist at this time, though some great programs at the national level can assist first-time home buyers with disabilities.

The U.S. Department of Housing and Urban Development's (HUD) Housing Choice Voucher (HCV) program allows qualified buyers to use vouchers to buy a home and receive monthly assistance for homeownership expenses.

The U.S. Department of Agriculture (USDA) helps people with disabilities in rural communities achieve homeownership by guaranteeing mortgages made by community banks through its Single-Family Housing Guaranteed Loan Program.

Learn more about national resources for disabled first-time home buyers.

What's the process of buying a house for the first time in Michigan?

As a first-time home buyer, you should know the programs that can assist you financially in purchasing a home in Michigan. But buying a home is a complex process. As a newbie, where do you start?

Step 1: Evaluate your financial situation

Address your credit score and existing debt-to-income (DTI) ratio to determine the first-time home buyers assistance programs for which you qualify.

Look at your savings with an eye toward what you might expect to spend on your down payment, closing costs, monthly payments, and maintenance costs for a new home. The median price of a home in Michigan is $226,000. For most loans you'll need a down payment of between 3%–20% of the property's price. That means you would need $6,780-45,200 for your down payment.

In Michigan, homeowners typically spend $2,065 on maintenance costs annually, but this can vary widely based on the house. In general, you should save 1% of the house's value each year for repairs.

Step 2: Choose the right neighborhood

The neighborhood you live in impacts everything from your daily commute, to where your kids go to school, to where you go out for dinner (or order takeout!).

Fortunately, Michigan has a variety of communities to suit your needs. There’s the resurgence of Detroit. It's one of the largest cities in the Midwest, and it has affordable home prices — the average is well below $100,000.

Then there's the allure of its many college towns like Ann Arbor (home to University of Michigan), Ypsilanti (Eastern Michigan University), and Grand Rapids (home to about 15 colleges and universities), and fun, artsy cities like Kalamazoo.

Home values vary quite a bit in Michigan, so you'll want to look at the average home prices for the city or neighborhood you’re interested in to see if you can afford to live there.

Step 3: Find a great real estate agent in Michigan

A good, local real estate agent will be your trusted ally during the home-buying process. They can help make sure everything runs as smoothly as possible.

Make sure your real estate agent has experience in your price range and neighborhood of choice, as well as high ratings and reviews online from happy clients.

👋 Need a great agent on your side?

Connect with top local agents who can help you get a great deal on a new home. Eligible buyers will also get 0.5% of the price back as cash in their pocket after closing.

Step 4: Get pre-approved for a mortgage

Most sellers won't show you their home unless you have a mortgage pre-approval letter. They don't want to waste their time with buyers who aren't serious or financially ready to put in an offer. And you don't want to waste your time falling in love with a home you can’t afford.

When shopping for a mortgage, compare interest rates and narrow down your choice of lenders based on terms they have to offer.

Once you're pre-approved for a mortgage, make sure your credit and financial situation doesn't change:

  • Avoid opening new credit accounts.
  • Don't close any accounts that have been open for a long time.
  • Make all of your credit card payments on time.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

Step 5: Start house hunting in Michigan

This can be the fun part of home buying! But be prepared. Make sure you have a handle on what are "must haves" for your home vs. "nice to haves."

Depending on the time of year, you may have fewer home options to choose from. In Michigan, fewer homes are for sale in the winter months, due in part to the harsh winter weather at that time. You'll have more choices in the spring months of April, May, and June.

Step 6: Make offers

Once you find a house you love, make an offer and convince the seller to sell to you.

You’ll want to move quickly — particularly from July to October, when inventory is historically at its lowest and buyers snap up homes fast.

You’ll want to work with a real estate agent who knows how to write a strong offer letter for the area you’re buying in.

Step 7: Inspections and appraisals

Once a seller accepts your offer, follow a series of due diligence steps to ensure the home you’re buying is exactly what you signed up for.

Inspections vs. appraisals

Inspection: A licensed professional checks the house for any unseen, unexpected, or potential issues.

Appraisal: An appraiser hired by your lender will examine the house and determine how much it's worth.

Make sure you have a licensed inspector check the home's key components:

  • Electrical system
  • Foundation
  • HVAC system
  • Plumbing
  • Roof

Aside from a general inspection, Michigan also recommends buyers have the following inspections and testing done before closing on a home:

  • Radon testing: It's not required by law, but Michigan strongly recommends buyers test homes for radon. If the seller hasn't had the house's radon levels tested recently, consider having it tested before closing on the home.
  • Termite inspection: Pest inspections are mandatory in 25 Michigan counties. Northern areas of the state are typically less likely to experience termite infestations. But your safest bet is to get the inspection regardless of location. It's better to be safe than sorry.

After inspections and appraisals, you'll have a chance to go back to the negotiating table if something unexpected pops up and possibly get a price reduction if warranted.

Step 8: Final walkthrough and closing

Though not legally required in Michigan, you should seriously consider having a real estate attorney to at least review the home purchase contract and attend the closing to make sure you understand the heaps of paperwork you'll be signing!

Your agent can recommend an attorney, but know the final decision is yours. Interview lawyers before hiring them to make sure they have the experience you need. Your agent or attorney should explain every document before closing, but still ask any remaining questions you have before signing.

Do a final walkthrough of the property to ensure it's still in the expected condition. Stay focused so you don't miss anything. Bring your checklist of items that needed to be addressed from the inspection. And bring a trusted friend or family member with you, plus your real estate agent.

» DETAILS: 8 Steps to buying a house in Michigan

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FAQs for first-time home buyers in Michigan

Home buyers typically have to pay 3-6% of the home's price in closing costs. Considering the median home price in Michigan is 226,00, that amounts to $6,780-13,560.

For Michigan State Housing Development Authority (MSHDA) home buyer assistance programs, you'll want to have a credit score of at least 640.

For the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Authority (FHA), the Veterans Administration (VA), and the U.S. Department of Agriculture (USDA), the minimum credit score required is 580.

The higher your credit score, the better loan interest rate you can get.

Yes. The Michigan State Housing Development Authority (MSHDA) offers two loan programs:

MSHDA also offers a mortgage credit certificate program that allows first-time home buyers to offset a portion of the amount they owe in mortgage interest on their taxes.

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