How MSHDA Works in 2024

For homebuyers in Michigan, the Michigan State Housing Development Authority (MSHDA) provides an opportunity to make homeownership more accessible. It’s designed to help buyers, especially those struggling with down payments and closing costs. On this page we go through everything you need to know about how MSHDA works, how to qualify, how long it takes, and when MSHDA loans are forgivable (spoiler alert: almost never ).

How Does MSHDA Work?

MSHDA operates as a state-backed loan program that assists homebuyers with their mortgage needs. The only product MSHDA currently offers is a $10,000 down payment assistance loan .This loan is available as a piggyback to standard mortgage options like FHA, Conventional, and USDA loans. It is an interest-free loan that homebuyers do not need to repay until they sell or refinance the home.

Veterans:  If you’re using a VA Loan, interest rate reduction is the only benefit available to you through MSHDA. The $10,000 loan is off the menu in this case. 

What Can MSHDA Be Used For?

MSHDA can help cover:

• Down payment
• Closing costs
• Other fees/professional compensation

The $10,000 MSHDA offers is not limited to being applied to one specific charge. It’s simply additional help that can be applied where needed. 

Who Qualifies for MSHDA?

It’s a common misconception that MSHDA is only for first-time homebuyers. This is not true. Anyone purchasing a home in Michigan, first-time or not, can potentially qualify, provided they meet the following conditions:

• Purchase price cap :The home purchase price must not exceed $224,500.
• Income limits :Your household income must fall within MSHDA's set limits, which vary depending on the county and the number of people in your household. Income from anyone 18 years or older living in the house is included, even if they are not part of the loan.
• Credit requirement :You need a minimum credit score of 640.

Unlike in the past, there is no longer an asset cap, so even if you have a large amount of cash savings, you can still use MSHDA’s down payment assistance.

If your income, credit, and home price meet these criteria, MSHDA could be a viable option for you.

How Long Does MSHDA Take to Process?

The MSHDA loan process involves some additional steps, which can extend the closing timeline. After your lender completes the standard mortgage process (preapproval, underwriting, appraisal), the loan must then be sent to MSHDA for approval.

MSHDA’s timeline can fluctuate depending on the time of year and their current backlog. Typically, it can take anywhere from 24 hours to 10 days for MSHDA to review and approve the loan. It’s crucial to account for this when working with your real estate agent and loan officer , especially in competitive markets where time is a factor.

Are MSHDA Loans Forgivable?

Generally speaking,  no, MSHDA loans will not be forgiven. The $10,000 provided by MSHDA is a zero-interest loan and must be paid back when you sell, refinance, or no longer occupy the home as your primary residence.

However, it should be mentioned that MSHDA does reserve the right to forgive loans in “special circumstances”. There are some rare exceptions where the loan might be forgiven, but these are handled on a case-by-case basis. In other words, expect to have to pay it back in full. 

Is MSHDA Right for You?

MSHDA could be a great option for you if you need help covering your down payment and/or closing costs. However, it might not be the best option for you, and here’s why: 

Let’s say you buy a house for $220,000. If your down payment is 3.5%, that’s $7,700. With MSHDA assistance you can get that covered – and then you’ll immediately be that much more in debt. Meanwhile...

There may or may not be grants or other programs available to you that you don’t have to pay back. 

It is essential to work closely with a knowledgeable loan officer familiar with the program’s nuances to get a picture of your best options, and avoid potential pitfalls. 

If you’re interested in using MSHDA, start by discussing your options with a lender to see if you qualify and to understand how it can work in your favor. With the right guidance, MSHDA could make the difference of your ability to buy a home, like it has for so many others.