Down Payment Assistance

Down payment assistance (DPA) is money from a state housing agency, local government, or nonprofit that covers some or all of your down payment and closing costs, typically as a grant, a forgivable loan, or a 0%-interest deferred loan with no monthly payment. For buyers who can afford a monthly payment but haven’t been able to out-save rent, DPA is often the difference between buying this year and buying someday.

How it works

DPA layers on top of a normal first mortgage, usually FHA or conventional. You qualify for the first mortgage the standard way, and the assistance program funds most or all of the cash you’d otherwise bring to closing. The assistance itself comes in three shapes:

Grants: money that never gets repaid. The rarest and smallest form.
Forgivable second mortgages: a lien that burns off over time (commonly 5–15 years). Stay long enough and it’s a grant; sell early and a prorated portion is repaid.
Deferred-payment second mortgages: a 0%-interest loan with no monthly payment, repaid only when you sell, refinance, or pay off the first mortgage. This is the most common structure, and it’s how Michigan’s flagship program works.

The critical point: because none of these carry a monthly payment, they don’t hurt your debt-to-income ratio. The program’s cost to you is at exit, not every month.

Michigan: the MSHDA MI 10K DPA

Priority Home Mortgage is headquartered in Grand Rapids, and the Michigan State Housing Development Authority (MSHDA) program is the one we use most. As of 2026 (all figures subject to change):

Up to $10,000 in assistance in hundreds of designated Michigan ZIP codes, with a standard tier of around $7,500 elsewhere, paired with an MSHDA MI Home Loan first mortgage
Structure: 0% interest, no monthly payment, repaid when you sell, refinance, or pay off the first mortgage
Credit score: typically 640+ (660+ for multi-section manufactured homes)
Income limits: vary by county and household size, broadly in the $84,000–$113,000 range as of 2026
Sales price limit: around $453,000 statewide as of 2026
First-time buyer rule: no ownership in the past 3 years, waived in targeted areas
Your skin in the game: typically at least 1% of the purchase price from your own funds
Homebuyer education: a required course before closing

MSHDA has periodically run larger pilots (a $25,000 tier existed in past years), and program terms genuinely change year to year, so treat every number here as “verify at application time,” which we do as a matter of course.

Beyond Michigan: PHM’s branch states

PHM has branch teams in Michigan, Florida, Colorado, Tennessee, and North Carolina, and is licensed in 41 states through PFN Lending Group. Every one of those states runs its own housing finance agency with DPA of its own (Florida’s Hometown Heroes and HFA programs, Colorado’s CHFA assistance, Tennessee’s THDA Great Choice Plus, North Carolina’s NC Home Advantage), plus county and city programs layered underneath. Structures rhyme with Michigan’s: income limits, price limits, buyer education, and a forgivable or deferred second. If you’re buying in any state we serve, ask. There’s usually a program, and most buyers have never heard of it.

Who qualifies

Common threads across programs (each program sets its own rules; these are typical, not promises):

Credit score: typically 620–660 minimum depending on the program
Income: under the program’s county-specific limit. These are moderate-income programs, but the ceilings are higher than most people assume
First-time buyer status: usually required, defined as no ownership in 3 years
Primary residence: you must live in the home; investors are excluded
Purchase price: under the program cap
Education: a homebuyer course (often online, a few hours)
Minimum contribution: often around 1% of the price from your own or gifted funds

What it costs

The assistance itself: 0% interest and no payments on deferred structures; the balance is simply due at sale, refinance, or payoff
Rate on the first mortgage: program first mortgages sometimes price slightly differently than open-market loans, so we compare both paths rather than assuming
Normal closing costs still exist (2%–5% of the loan amount), though DPA and seller concessions can cover most of them
Exit friction: a deferred second must be repaid when you refinance, which slightly complicates (but rarely prevents) a future refinance

Pros and cons

Pros

Turns “years of saving” into “buying this year” for qualified borrowers
No monthly payment on the assistance; no DTI impact
Stackable with FHA or conventional firsts, seller concessions, and gift funds
Renting has a cost too: every year of waiting is rent paid and appreciation missed

Cons

Income, price, and geography limits exclude some buyers and some homes
The deferred balance is real debt; your equity at sale is reduced by the payoff
Program funds can run out mid-year, and terms change annually
Slightly more paperwork and coordination than a standard loan
Starting near 100% financing means thin equity in your early years

DPA vs. the nearest alternatives

Low-down-payment loans alone: conventional loans allow as little as 3% down and FHA 3.5%. If you have modest savings or gift funds, you may not need a program at all, and skipping one simplifies the deal. We price both ways.
Gift funds: family gifts are allowed on virtually every loan type and combine freely with DPA.
A 2-1 buydown: solves a different problem (the size of the early payments rather than the cash to close) and is typically seller-funded, so the two can sometimes be combined.

Run the payment math for any of these scenarios in our mortgage calculator suite.

How to get started with Priority Home Mortgage

DPA programs are local, changeable, and paperwork-sensitive: exactly the kind of thing a local lender should handle for you. Tell us where you’re buying and roughly what you earn via a quick quote, and we’ll check current MSHDA (or your state’s) eligibility, compare the program path against a plain low-down-payment loan, and give you the honest winner. No approval is ever guaranteed, but finding every dollar you’re eligible for is the job.

Down Payment Assistance: your questions, answered

Is down payment assistance free money?

Sometimes, but usually not, and that's fine. True grants never get repaid; forgivable seconds are earned free by staying in the home a set number of years; deferred seconds like MSHDA's are repaid, without interest, only when you sell, refinance, or pay off the first mortgage. What they all share is zero monthly payment, which is what makes the purchase possible now.

How much down payment assistance can I get in Michigan?

MSHDA's MI 10K DPA offers up to $10,000 in many Michigan ZIP codes, with a standard tier around $7,500 elsewhere, paired with an MSHDA first mortgage (figures as of 2026 and subject to change). It's a 0% deferred loan with no monthly payment, repaid when you sell, refinance, or pay off the loan. The funds can cover down payment, closing costs, and prepaids.

Do I have to be a first-time homebuyer to get assistance?

For most programs, yes. But 'first-time' means you haven't owned a home in the last three years, so previous owners frequently re-qualify. Some programs also waive the rule in targeted areas or for veterans. Don't rule yourself out without checking.

Does using down payment assistance make my offer weaker?

In most cases sellers never notice. DPA rides along with a standard FHA or conventional loan, and closings happen on normal timelines. In a fast-moving multiple-offer situation, tight program turn times can matter, so work with a lender who knows the program's rhythms. A strong pre-approval letter matters far more than the funding source.

Can DPA cover my closing costs too, or just the down payment?

Most programs, including MSHDA's, allow funds to go toward down payment, closing costs, and prepaid items like escrow and insurance. Combined with seller concessions, many buyers get to the closing table with only their required minimum contribution, often around 1% of the purchase price from their own funds under MSHDA rules.

What happens to the assistance when I refinance or sell?

Deferred seconds like MSHDA's come due at that moment: the balance is repaid from your sale proceeds or rolled into the refinance payoff. Forgivable seconds may be partially or fully forgiven depending on how long you've stayed. Always tell your loan officer about a DPA lien before refinancing so the payoff is handled correctly.