How much do you need for a down payment in Michigan?

The 20% down idea keeps a lot of people renting longer than they need to. It's a nice goal because it gets rid of mortgage insurance, but it's not a requirement for most loans. Here's how it actually breaks down.

Minimum down by loan type

• Conventional: as low as 3% for qualifying buyers, more commonly 5% and up. Under 20% you'll pay private mortgage insurance until you build enough equity to drop it.
• FHA: 3.5% down with a credit score of 580 or higher. FHA has its own mortgage insurance that works a bit differently.
• VA: 0% down for eligible veterans and service members.
• USDA: 0% down in eligible areas, which includes some of the more outlying parts of our region.

On a $280,000 home, 3.5% is $9,800 and 5% is $14,000. That's a very different savings goal than $56,000.

Michigan's MI 10K DPA

MSHDA, the Michigan State Housing Development Authority, offers the MI 10K DPA. The basics:

• Up to $10,000 toward your down payment, closing costs and prepaids.
• 0% interest and no monthly payment. It's repaid when you sell, refinance, pay off the first mortgage or stop living in the home.
• It has to be paired with a MSHDA MI Home Loan.
• Everyone on the loan needs to complete a homebuyer education course.
• There are income and other limits, so talk with a MSHDA approved lender about whether you qualify.

Programs like this change from time to time, so always confirm the current rules with the lender.

The other cash to plan for

The down payment isn't the only money you'll need:

• Closing costs, usually 2% to 5% of the price. Here's our breakdown of buyer closing costs in Michigan.
• Earnest money when your offer is accepted. It counts toward your down payment at closing.
• Inspection and appraisal, paid before closing.
• A cushion. I always tell buyers to keep something in the bank after closing. Houses find ways to need things.

Gift money is fine

Most loan programs allow gifts from relatives toward the down payment. The lender will want a gift letter and a paper trail showing where the money came from, so don't just deposit cash and hope for the best.

Where to start

Talk to a lender first, then shop. A pre-approval tells you what you can borrow and which programs fit. Then search homes in your price range. Each listing page has a payment calculator so you can try different down payments and see the monthly number change.