Month: March 2024

Homeownership often presents challenges, particularly for those with financial constraints. However, Michigan residents have a lifeline in programs like the Michigan State Housing Development Authority (MSHDA) loans and down payment assistance (DPA), which provide vital support to turn individuals into home owners.

What is an MSHDA Loan?

MSHDA is a state agency committed to promoting affordable housing opportunities for residents. One of its flagship initiatives is assisting individuals who lack the financial means to make a substantial down payment on a home purchase. This can include first-time homebuyers, potentially repeat homebuyers, and current homeowners in targeted areas. The best resource for finding out what programs are available is to call an experienced lender who can find out if you qualify.

It’s important to understand that the term “MSHDA loan” is somewhat misleading. In reality, borrowers are not obtaining a separate loan from MSHDA; instead, they are receiving financial support in the form of down payment assistance, which is added to their first mortgage. Essentially, MSHDA acts as a financial partner, offering up to 10 thousand dollars in select areas to alleviate the upfront costs of purchasing a home.

MSHDA loans can be used with various loan programs, including FHA, conventional, VA, and USDA. This flexibility allows borrowers to access MSHDA’s down payment assistance alongside the specific benefits offered by these loan options.

Advantages of MSHDA Loans

MSHDA loans assist borrowers in bridging the financial gap typically required in a mortgage. In a standard purchase transaction, borrowers must provide funds for the down payment, closing costs, and prepaids to establish escrows for taxes and insurance. MSHDA home loans aim to close this gap, enabling many borrowers to purchase a home with as little as 1% of their purchase price.

MSHDA loans offer several advantages that make homeownership more accessible to Michigan residents:

• MSHDA offers down payment assistance programs that provide financial assistance to cover down payments and closing costs, reducing the upfront expenses associated with buying a home.
• Buyers can leverage MSHDA’s resources to afford homes in different Michigan communities or school districts.
• MSHDA’s statewide program ensures accessibility across Michigan.
• As the state’s Housing Finance Agency, MSHDA provides exclusive benefits like discounted mortgage insurance.
• More stability in interest rate fluctuations
• MSHDA offers below-market interest rates, further reducing mortgage payments and increasing purchasing power.
• This comprehensive approach enhances affordability and competitiveness in Michigan’s housing market.

MSHDA Loan Programs

MI Home Loan

The MI Home Loan caters to both first-time homebuyers statewide and repeat buyers in specific areas. Under the MI Home Loan, all adults residing in the home must apply for and qualify for the loan, with some exceptions for full-time students or disabled household members.

Down Payment Assistance (DPA) Programs

Down payment assistance (DPA) programs play a crucial role in helping homebuyers overcome financial hurdles. Think of a DPA program as a tool to help you, as a buyer, make a more competitive offer on a home. With favorable terms, including a 0% interest rate and no monthly payments, it is a valuable resource in the home buying process. However, it is important to keep in mind that the DPA is indeed a loan and will need to be repaid in the future. 

For homebuyers who qualify, MSHDA offers down payment assistance statewide. When utilizing MSHDA’s Down Payment Assistance (DPA), buyers must typically provide 1% of the purchase price upfront. For example, if the home is priced at $100,000, the borrower must bring in $1,000. MSHDA then supplements this with up to $10,000 in assistance, helping buyers bridge the financial gap required for their home purchase.

Repayment of MSHDA Loans

The down payment assistance provided by MSHDA is not forgivable, meaning it must be repaid at some point. While borrowers don’t have to make monthly payments or incur interest on this assistance, they are required to pay back the borrowed funds.

However, if you remain in your home without refinancing or selling, there’s no immediate obligation to repay. Essentially, it’s a deferred payment arrangement where you pay back the assistance when specific events occur. So, if you decide to refinance your home in the future or sell it and it has appreciated in value, you’ll need to satisfy the loan against the property to repay the assistance received.

Steps to Apply for an MSHDA Loan

Applying for an MSHDA loan follows a structured process:

• Find an approved MSHDA lender: Borrowers should identify lenders approved by MSHDA, like Mortgage 1, to originate loans under its programs.
• Completing the MSHDA loan application: Applicants must complete the necessary paperwork and provide supporting documentation to the lender.
• Work with a knowledgeable real estate agent: Partnering with an experienced real estate agent can streamline the homebuying process and provide valuable guidance throughout the transaction.

Mortgage 1 is a Top MSHDA Lender

MSHDA loans and Down Payment Assistance programs offer valuable support to Michigan residents seeking to achieve the dream of homeownership. Mortgage 1 has been a top MSHDA lender for the past decade, helping numerous homeowners with affordable financing. Give us a call if you want to explore your options!

Think of an escrow account as your financial buddy who’s holding onto some cash for you, making sure all the important bills related to your house get paid on time. This is the spot where a chunk of your mortgage payment sits until it’s time to pay property taxes and insurance premiums. Here’s the lowdown in simple steps:

What’s an Escrow Account?

Imagine you’re throwing a party and you’ve got a friend who’s great at handling the food and music setup without you needing to stress about it. That friend is like your escrow account – handling the nitty-gritty of tax and insurance payments so you don’t have to.

How Does It Work?

Every month, when you pay your mortgage, a portion of that payment gets tucked away into your escrow account. When it’s time to pay property taxes or your homeowner’s insurance, your escrow buddy steps in and pays those bills for you, using the money you’ve been setting aside.

Why Do You Need One?

It’s all about making life easier. With an escrow account, you don’t have to remember to save for those big bills or worry about due dates. Plus, your lender likes it because it reduces the risk of you missing those big payments.

Pros & Cons

Pros: No big surprise bills since you’re saving gradually. Peace of mind knowing everything’s taken care of.

Cons: Your monthly mortgage payment can change based on tax or insurance adjustments. You also need to trust your lender to make payments on time.

Keeping Track

You get a statement every year that tells you how much was paid out and what you’ve got left. It’s like getting a report card for your account, letting you know if you’re putting in too much, too little, or just the right amount.

What If There’s Extra Cash?

Sometimes, you might end up putting too much into escrow. If that happens, you usually get a refund. Think of it as finding money in your couch cushions but way better because it’s your own money coming back to you.

Shortfalls

If there’s not enough cash in there when bills are due, you’ve got a shortfall. You’ll need to cover the difference. Your lender will let you know, so you can sort it out together.

What happens to my Escrow Account when I sell or refinance?

When you’re ready to shake things up by selling your pad or refinancing your mortgage, here’s what goes down with your escrow account:

Selling Your Home

Closing Time: When you sell, your escrow account plays a part at closing. Any leftover cash in there gets used first to cover any remaining property taxes or insurance bills. Think of it as using up the last bit of ketchup before you throw the bottle out.

The Final Handshake: After those bills are squared away, if there’s still some money hanging around in your escrow, you’ll get it back. It’s like finding an extra farewell gift at the end of the party. This usually comes in the form of a check sent to you after the sale is all wrapped up.

Refinancing Your Mortgage

New Game, New Rules: Refinancing means you’re getting a new mortgage to replace the old one. Since it’s a whole new ballgame, your old escrow account gets closed out, and a new one might be set up by your new lender.

Transition Team: Just like when selling, any money left in your old escrow account will be refunded to you. Then, you might need to set up a new escrow account with your new mortgage, starting the saving process all over again for taxes and insurance.

Starting Fresh: You’ll typically need to fund the new escrow account upfront, often at closing. This might mean paying a couple of months’ worth of property taxes and insurance premiums to get things rolling.

SUMMARY

Whether you’re moving on to a new place or just snagging a better deal on your mortgage, it’s all about transitioning smoothly. Your escrow account’s got your back, making sure the financial side of things is tidy, so you can focus on what’s next.

TLDR? They’re like a safety net for your property taxes and insurance bills, keeping everything smooth and sorted so you can focus on the fun parts of homeownership.