Homeownership Programs

Owning your own home might seem like an impossible dream, or you may own your home and worry about losing it — in both cases, there are programs that can help you with homeownership:

Down Payment and Mortgage Programs

A mortgage is the type of loan used to buy a house or other real estate. A homebuyer typically has to come up with 20% or more of the sale price of the home as a down payment on the mortgage.

You might think that you can never save up enough for a down payment on a home, but there are programs that can help you with your down payment and mortgage so that you don’t need to save up as much as you may think. If you have a disability, the program may also help pay the cost of repairs or improvement to make the home more accessible.

The Michigan State Housing Development Authority (MSHDA) offers a Down Payment program that helps with a down payment of up to $7,500 for people buying a home for the first time and for repeat homebuyers in certain areas.

The Mortgage Eligibility Tool lets you enter information about your income, estimated loan amount, and home buying location, and find out if you might qualify for an MSHDA down payment and mortgage program.

Here are some other ways you may be able to get help with your down payment and mortgage:

  • Some cities and counties offer financial help that may cut your share of the down payment to as little as 1% of the purchase price. The rules are different for every program. The U.S. Department of Housing and Urban Development (HUD) lists homeownership assistance programs by Michigan cities and towns.
  • The Federal Housing Administration (FHA) offers mortgages with down payments as low as 3.5%, low closing costs, and easy credit qualification.
  • Veterans Administration (VA) Home Loans are available with a zero down payment.
  • Some credit unions and other lenders offer zero-down-payment mortgages.
  • Habitat for Humanity requires only a small down payment, and then you put in “sweat equity” hours helping build your own home or the homes of others in the homebuilding program; cleaning up construction sites, working in a Habitat ReStore, or doing Habitat office work or other tasks also qualify. Contact your nearest Habitat for Humanity chapter for more info.
  • Your family may be able to help with your down payment. A cash gift to help with a down payment is allowed on most types of loans. The gift may affect the income taxes of the person giving the money, but there are usually no limits on the amount of the gift.

Individual Development Accounts (IDAs)

An Individual Development Account lets you save up money to buy a home, pay for higher education, or run your small business. To open an IDA, you must find an IDA program in your area and meet certain eligibility requirements. Once you open your account, the sponsor of your IDA program may match the funds you deposit, helping your account grow faster.

The eligibility rules for IDA programs vary. Generally, you must be working, but have low total income. Once you’re in the IDA program, you must also take financial education classes that prepare you for homeownership.

The biggest benefit of an IDA is that each time you deposit money into your savings account, the sponsors of your IDA program “match” your deposit with money of their own.

Note: The matching funds are put in your account after you save up the amount you have agreed to save.

Another benefit is that some federally funded IDA programs allow you to save up money without having to worry about asset limits for programs like Supplemental Security Income (SSI).

Most IDA programs only let you save a limited amount of money in your account, usually $4,000 - $6,000. This includes the money you deposit plus the matching funds. Once you reach the limit, you aren't allowed to deposit any more money into the account. IDA programs also limit how long you can save (usually three years).

You can read more about IDAs and how to find an IDA program in DB101’s Building Your Assets and Wealth article.

ABLE Accounts

You may be able to save up the money for a down payment and other home-buying expenses in an ABLE Account, which lets some people with disabilities save money without it being counted for the asset limits for SSI and other benefits. Learn more about ABLE Accounts.

Section 8 Homeownership Voucher Program

Some public housing authorities (PHAs) let you use a Section 8 housing choice voucher to buy a home or pay monthly homeownership expenses instead of paying rent. The amount of money that Section 8 pays for a home is the same as the amount it would pay for rent.

Read the DB101 page on How to Apply for Benefits at PHAs so you know how to get Section 8. There are waiting lists, and it can take time before you get a housing voucher.

The Key to Own Homeownership Program helps families with a rental housing choice voucher change it into a homeownership voucher. You have to:

  • Be working at least 30 hours a week and earning at least $15,000 per year, but there are exceptions for elderly people and people with disabilities
  • Be a first-time homebuyer or have not owned a home in the last three years
  • Be in good standing with your Section 8 housing choice voucher program

You have to fill out an application with the Michigan State Housing Development Authority (MSHDA), and if you are accepted to the Key to Own program, you need to attend free Homebuyer Education and Financial Management classes. After you meet all the requirements, Key to Own staff can help you find a participating lender to get you pre-approved for a mortgage.

You can also check with your local housing authority to see if you can use your voucher for homeownership. If you want to buy a home and don’t have a voucher yet, apply for vouchers at housing agencies that allow homeownership.

Section 8 Homeownership Voucher rules

Most of the rules for homeownership vouchers are exactly the same as the standard Section 8 vouchers, but there are a few added requirements:

  • No one in your household can currently own a home, or have owned one in the last three years
  • No one in your household can have been given homeownership help in the past and then defaulted on the mortgage
  • You must attend and complete a homeownership counseling program
  • If you are not disabled or elderly, you must have full-time employment

If you or somebody in your family has a disability, you may be more likely to be allowed to use your Section 8 voucher for homeownership if having your own home is considered a necessary reasonable accommodation.

Finding a Home to Buy

When you have a Section 8 voucher that you can use for homeownership, start looking for housing to buy right away. Like rental vouchers, there may be a time limit for buying a home. There may also be limits on the size and price of the home you can buy, and rules about the types of mortgage you can get. However, there are no limits on which neighborhood you live in.

Key to Own or housing authority staff can refer you to local realtors and lenders who can help you. If you are looking into this on your own, be careful about your lender and realtor. It is important to have a lender and a realtor who know how the Section 8 Homeownership Program works in your area, who have relationships with the local staff who handle the program, and who understand the paperwork. This helps the home-buying process go more smoothly; it also gives confidence to home sellers that you have the resources to buy their home.

Buying the Home

When you’ve found a home to buy, the housing authority inspects it to make sure that it is in decent condition and meets all safety and regulatory standards. It also has to be inspected by an independent inspector that you choose and pay.

If Key to Own or the housing authority gives the okay for you to buy the home you found, you can go ahead and buy it. Make sure to get a “contract of sale” and give a copy of it to the housing authority. Check with the housing authority about what must be included in the contract. If you don’t give your housing authority a copy of this contract, you won’t be able to get Section 8 support for your housing.

Once you have everything lined up and the sale actually goes through, your housing authority calculates how much you have to pay on your mortgage each month and how much Section 8 pays. As with Section 8 rental assistance, the amount you have to pay is about 30% of your income. As long as your income and family situations don’t change much, you can get Section 8 homeownership support for 10 to 15 years. And if you have a disability or are elderly, there is no time limit; you keep getting Section 8 homeownership support for as long as you need it.

Once your mortgage is fully paid off, you are the owner of the home and the government is no longer involved. You won’t get Section 8 benefits anymore, but that is fine because you’ll own your own home and won’t owe any more payments on it.

Foreclosure Prevention

If you are having trouble paying your mortgage, there are several programs that can help you. Be sure to open all mail from your lender, and call for help as soon as you receive a warning notice from your lender:

  • The Step Forward Michigan Program at 1-866-946-7432 may be able to help you catch up on your mortgage or tax payments.
  • Making Home Affordable offers a national hotline with counselors available 24 hours a day, seven days a week at 1-888-995-HOPE (4673).
  • The U.S. Department of Housing and Urban Development (HUD) Counseling & Agency Locator Line at 1-800-569-4287 can refer you to a housing counselor who can guide you through the process.

These hotlines have experts who answer the phone and give you information about what you can do to keep your home.

Here are some other resources that can help you prevent foreclosure:

Property Improvement Program (PIP)

If you need to repair your home to make it more livable or accessible and your home is worth more than you owe on your mortgage, the Property Improvement Program offers loans of up to $25,000 with interest rates of 4% to 8%, depending on your gross household income. Your home must be your primary residence. To learn more or apply, contact an MSHDA-approved participating lender or community agent in your area.