Simplifying MSHDA Homeownership Programs: A Guide for Realtors

Helping Your Clients Achieve Homeownership Dreams in Michigan

Do you have clients eager to own their home but struggling with down payments or qualifying due to current interest rates? The Michigan State Housing Development Authority (MSHDA) offers unique solutions that might be the answer.

What is MSHDA?

MSHDA collaborates with communities and organizations throughout Michigan to enhance housing stability and address the challenges encountered by low-income individuals and families. Through providing access to housing, educational opportunities, and vital community resources, we aim to dismantle obstacles that hinder the progress of those striving for a brighter future. This concerted effort ensures that families and individuals have the support they need to thrive and succeed.

Can MSHDA Loans Be Refinanced?

Yes! Refinancing is an option, particularly beneficial when interest rates drop. Doing so can consolidate both the primary and DPA loan into a more affordable loan. Also taking into account any equity the buyer has accumulated to possibly lower Mortgage Insurance.

Exploring MSHDA’s Two Key Programs

1.       Lower Interest Rate Program: This program offers below-market rates, helping the buyers to qualify with a lower P&I payment. This option does not allow for DPA. If the buyer can manage the required down payment, closing costs, and escrow through savings, gifts, or seller concessions, this might be the perfect fit.

2.       Down Payment Assistance Program: The more popular option provides up to $10,000 in assistance. This comes as a below-market rate, but slightly higher than the first option. While seller concessions are allowed (determined by the main mortgage program), they may directly affect the amount of DPA the buyer will get. Make sure to reach out when trying to determine how much is needed. At its core, MSHDA provides a “piggyback” mortgage approach to down payment assistance. Complementing primary mortgages like Conventional, FHA, VA, and Rd Loans. This assistance isn’t a grant, but a zero-interest loan that doesn’t require payments as long as the property remains the buyer’s primary residence.

Qualifying for MSHDA Programs

1.       Credit Score: A minimum score of 640 is required, even if the primary loan type allows for a lower score, MSHDA has its requirement of 640. In the past, a 660 minimum was required when the property was a manufactured home, however, that requirement has been lifted.

2.       Debt-to-Income Ratio (DTI): The DTI must not exceed 45%, including all debts plus the proposed PITI mortgage payment.

3.       Minimum Contribution: Buyers need to invest at least 1% of the purchase price into the transaction. Amounts paid out of closing, like the EMD and the Appraisal, will be credited toward that 1%.

4.       Employment History: MSHDA does require a 2-year employment history not only documenting every employer but also verification of employment for every employer.

5.       Property Limitations: Up to 2 acres, with potential exceptions allowing one lot of up to 5 acres. When there are additional lots, MSHDA will require they are not buildable or splittable lots.

6.       Homebuyer Counseling: A completion certificate from an approved Homebuyer Counseling Course is mandatory for all borrowers.

7.       First-Time Homebuyer Qualifications: While MSHDA is designed with the First-Time Homebuyer in mind, there are exceptions. A. If the buyer hasn’t owned a home in the last 3 years or B. If the buyer is purchasing in a Targeted County they qualify under this guideline.

8.       Income Limits: Income eligibility thresholds vary between $90,300 to $173,600 depending on where the home being purchased is located and the number of household members.

9.       Asset Limitations: There are no maximum or minimum asset requirements. In fact, the buyer is not allowed to put additional money down and still take full advantage of the DPA.

10.   Sales Price Limits: MSHDA has a max Sales Price of $224,500 for all counties.

Property Guidelines:

·        Appraisals: MSHDA generally accepts “as is” appraisals according to the guidelines of the main program (i.e. Conv, FHA, VA, RD) but reserves the right to flag repairs that will cause the buyer an immediate need regarding living conditions.

·        Manufactured Homes: Only eligible through FHA/MSHDA combinations. While I can do Conventional Manufactured Home Loans, once MSHDA is added, it is ineligible due to the CLTV (combined Loan to value) of the 2nd DPA loan.

The MSHDA Process:

After compiling all necessary documentation and completing the underwriting process, the file is presented to MSHDA. Approval times can vary, so it’s advisable to plan for a 45-day closing window to account for variable turn times and ensure timely closure.

This guide aims to demystify the MSHDA programs for realtors, providing a clear path to assisting clients in achieving their homeownership goals. If you have specific questions or need guidance on crafting an offer with MSHDA in mind, feel free to reach out.

Let’s work together to make homeownership a reality for more Michigan Families!

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