Ask The Realtor: How does the $7,500 down payment assistance program work
The Michigan State Housing Development Authority (MSHDA) offers qualifying homebuyers with up-to $7,500 in down payment assistance. When using the MSHDA program, you can purchase a home with only 1% down! A big misconception is that this program is only available for low income households. Over the past year, MSHDA has raised income limits which allows many more buyers to qualify. For example, in Washtenaw County a household of 3 or more people can have a household income up-to $108,000.
The assistance from MSHDA is an interest free, payment free second mortgage. As with any second mortgage, there will be a mortgage lien placed on title. However, unlike traditional second mortgages, there are no monthly payments and no interest charges. When you sell the home or payoff the first mortgage in full, then you will be required to pay back MSHDA the amount borrowed. For example, a qualifying homebuyer could use the MSHDA program and purchase a home with only 1% down. If that buyer lives in the house for 10 years and then sells, then only at that time do they pay MSHDA back the money used for the purchase. During that 10 year period, there were no payments or interest charges on the second mortgage with MSHDA.
In some areas you have to be a first time homebuyer, but in many areas you don’t, such as Washtenaw County. However, regardless of where you buy, you cannot own another home at the time of closing on the new one.
Not all Mortgage Lenders are approved by the state to offer the MSHDA down payment assistance program, which is why many buyers don’t ever hear about it from their Loan Officer. In addition, the interest rate is set by the State, as well as the allowable closing costs. Since the interest rate does not vary between lenders, it is most important to work with a Lender who understands how to work with the program. Visible Homes works closely with the #1 MSHDA Lender in the state and can provide you with a referral if needed.
Visible Homes has expert knowledge of the MSHDA program. We screen each home we show our clients, to make certain it will meet MSHDA’s property guidelines. In addition, we make certain the Sales Contract is written in a way that allows our clients get the most out of the program. If the Sales Contract is not written properly, the buyer could have to come up with much more than 1%. Our experience with the program helps our clients avoid costly mistakes.
The MSHDA guidelines vary by county, and in some cases, even by city. To learn more, or to see if you meet the MSHDA requirements, visit our MSHDA site at http://www.MSHDAloan.com or call us at 734.864.4044.
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