Purchasing your first home is an exciting journey, but figuring out how much you need for a down payment can feel overwhelming. If you’re a first-time homebuyer in Metro Detroit or Ann Arbor, Michigan, this guide will help you understand the basics of down payment requirements for popular loan programs.

Who is Considered a First-Time Homebuyer?

The mortgage industry defines a first-time homebuyer as someone who hasn’t owned a home in the last three years. Even if you’ve owned a home in the past, you can qualify as a first-time homebuyer if enough time has passed. This definition opens the door to several loan programs designed to make homeownership more accessible.

Minimum Down Payment Requirements by Loan Program

1. Conventional Loans (Fannie Mae and Freddie Mac)

Conventional loans are popular because they offer flexibility and competitive rates.

• Minimum Down Payment: As low as 3% for first-time homebuyers.
• Who Qualifies? Borrowers with good credit scores and stable income. You’ll need a credit score of at least 620, but higher scores will help you qualify for better rates.
• Private Mortgage Insurance (PMI): Required if your down payment is less than 20%.

2. FHA Loans (Federal Housing Administration)

FHA loans are great for buyers with lower credit scores or limited funds for a down payment.

• Minimum Down Payment: 3.5% if your credit score is at least 580.
• Who Qualifies? Borrowers with credit scores as low as 500 may qualify, but they’ll need a 10% down payment in that case.
• Mortgage Insurance Premium (MIP): FHA loans require both upfront and annual mortgage insurance, regardless of your down payment amount.

3. VA Loans (Veterans Affairs)

VA loans are available to eligible veterans, active-duty service members, and some surviving spouses.

• Minimum Down Payment: 0%—no down payment is required.
• Who Qualifies? Borrowers with a Certificate of Eligibility (COE) from the VA.
• Additional Benefits: No mortgage insurance is required, and these loans often have lower interest rates.

4. USDA Loans (U.S. Department of Agriculture)

USDA loans help buyers purchase homes in rural and suburban areas. Many locations in Michigan qualify for this program.

• Minimum Down Payment: 0%—no down payment is required.
• Who Qualifies? Borrowers with moderate or low incomes purchasing a home in a USDA-eligible area. Check the USDA eligibility map to see if your desired location and income qualify.

5. MSHDA Loans (Michigan State Housing Development Authority)

MSHDA offers down payment assistance programs for Michigan residents.

• Minimum Down Payment: Matches the program you’re using (e.g., 3% for a conventional loan or 3.5% for an FHA loan).
• Who Qualifies? Borrowers with a middle credit score above 640 and a household income below specific limits based on location and family size. Link to income limits here.
• Additional Benefits: Up to $10,000 in down payment assistance is available, and the funds are repaid only when you sell, refinance, or pay off your mortgage.

How to Choose the Right Program for You

The right program depends on your financial situation, credit score, and the type of home you’re looking to buy. For example:

• If you’re a veteran, a VA loan offers unbeatable benefits that you have earned.
• If your credit score is below 620, an FHA loan may be your best option.
• If you’re purchasing in a rural area, a USDA loan could allow you to skip the down payment altogether.

Saving for Your Down Payment

Many first-time homebuyers worry about saving for a down payment, but there are resources to help. In Michigan, the MSHDA program can make a big difference. Additionally, some lenders offer low or no down payment options tailored for first-time buyers.

Next Steps

If you’re ready to take the next step toward homeownership, let’s talk! I’m here to help you navigate your options and find the loan program that fits your needs. With the right guidance, buying your first home in Metro Detroit or Ann Arbor can be a rewarding and exciting process.

Contact me today to get started on your homeownership journey!