What is Down Payment Assistance or DPA?
Michigan has several Down Payment Assistance programs. Many of these are available for people who have not owned a home for 3 years. I like explaining it this way, because so may articles only say “First-Time Homebuyer” programs, when all of these down payment programs define “first-time” homebuyer as someone who has never owned a home or someone who hasn’t owned in 3 years.
DISCLAIMER: I am not a licensed lender, this is a brief overview. The availability of these programs may change with funding, and requirements may change throughout the year. Depending on the program which best fits your situation, may determine which lender I recommend you talk with.
There are several common down payment assistance programs in Michigan here are the basics:
- MSHDA – Michigan State Housing Development Authority. This is one of the most common, and allows for a $10,000 down payment assistance to be used for down payment and closing costs
- MSHDA – Housing Credit, get a 20% Housing credit for taxes for the life of the loan!!
- MSHDA – Rate Reduction program to get a cheaper interest rate on your loan
- National Faith Home Buyer Program – This program is funded by the individual community or through the county. This is city specific, and funds are limited. $10,000 – $14,999
- Lender Specific Programs – Certain Banks have specific programs available such as $7500 free down payment that does not have to be repaid. Another bank has Closing Cost credit to pay all of your closing costs down to $500, so $500 in closing costs is all you pay at closing.
OTHER FINANCING ADVANTAGES
Assumable Loans
We may never see purchase and refinance rates as low as they were in previous years. The economists estimate we may never see 2.5%-4% mortgage rates again, however, there are plenty of existing loans that are in this range that may be assumable by a new purchaser. Most lender’s will tell you that this cannot be done, and the main reason is that the loan officer does not make any money or commission on this loan. The other reason they talk you out of it, is that they will say, “Why would a lender let a new borrower assume a loan at 3% when a new loan is @6.5%?”
- FHA – Federal Housing Administration – Many FHA loans are assumable. You have to qualify for the loan, and have a plan to either cash out the difference between the loan amount and purchase price, or have a 2nd loan to cover the difference.
- VA Assumable Loans – VA Loans are Veterans Administration loans made to veterans and applicable organizations (not just armed forces). Little do many know, you DO NOT have to be a veteran to assume a VA loan.
Area Median Income Rate Reduction
Did you know that if your income is below the AMI or Area Median Income for the area, that you could qualify for a discounted interest rate? Example: Livonia, MI AMI = $90,800. So if you qualify for this conventional loan product, instead of a 7% interest rate, you could get a 6%, a 1% rate reduction!! (This is an actual example, but rates change daily, and you have to qualify with an experienced lender)
Conclusion
No Reason to over-complicate things and try to figure out all the possibilities yourself. Reach out to me and I can direct you to an experienced lender that can thoroughly explore the possibilities with you.
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