Qualifying
Down payment
The cash you pay upfront toward a home's price, with the mortgage covering the rest. It ranges from 0% on VA and USDA loans to 3.5% on FHA and 20% to avoid PMI.
What does down payment mean?
Your down payment sets your starting equity and affects your rate and whether you pay mortgage insurance. Michigan buyers have more low-down options than most realize:
- VA and USDA: zero down
- FHA: 3.5% down
- Conventional programs: as low as 3% down
Crucially, the MSHDA MI 10K DPA provides up to $10,000 toward the down payment and closing costs statewide as a 0%-interest loan — which can cut the cash needed on a $200,000 home from about $13,000 to a few thousand. A bigger down payment lowers the payment but isn't required to buy.
A Michigan example
On the $285,000 median home, 3.5% FHA down is about $9,975, while a full 20% is $57,000. The gap is exactly why programs like the MI 10K DPA exist — to shrink the upfront cash a first-time buyer needs to get in the door.
Common questions
Does a bigger down payment lower my rate?
It can, and it reduces or eliminates mortgage insurance below 20%. But it isn't required to buy — many Michigan buyers get in with 3–3.5% plus assistance and let equity build over time instead of waiting to save.
Can I use gift funds for a down payment?
Usually yes, with a documented gift letter from an eligible source such as a family member. Program rules vary on how much can be gifted, so confirm with your lender before the funds move into your account.
Related terms