State-specific mortgage assistance programs: How to find and qualify

Written by Samantha SheltonNMLS 1647301Updated October 2026

Every state runs a housing finance agency offering mortgage assistance: a below-market first mortgage paired with down payment help, delivered as a grant or a deferred-payment second loan that costs nothing monthly and comes due only when you sell or refinance. Amounts commonly run from a few thousand dollars to 3% – 5% of the purchase price. Michigan’s MSHDA lends up to $10,000 statewide at 0% through its MI 10K DPA Loan.

Learn how state-specific mortgage assistance programs work, including the difference between a grant and a deferred lien, the eligibility rules nearly every agency copies from the same federal statute, and how to apply through an approved lender. If you’re still choosing a mortgage, start with our loan types and programs guide.

Key takeaways:

• The deferred-payment second loan is the workhorse: It covers your down payment or closing costs, charges 0% with no monthly payment, and is repaid only when you sell, refinance, or move out. Michigan’s MI 10K DPA Loan lends up to $10,000 this way.
• Four gates decide eligibility: Income limits (often 115% of area median income, 140% in targeted areas), a purchase price cap, a homebuyer education class, and owner occupancy. Credit floors are commonly 640.
• Assistance layers on a federal loan, it doesn’t replace one: State help rides on an FHA, VA, USDA, or conventional first mortgage. On a $250,000 FHA purchase, the 3.5% minimum down payment is $8,750, which a $10,000 assistance loan covers outright.

What are state-specific mortgage assistance programs?

They’re subsidized loan and grant programs run by your state’s housing finance agency, funded largely through tax-exempt mortgage revenue bonds, that cut the cash you need at closing or the rate you pay afterward. Assistance is almost never a standalone check. It attaches to a first mortgage from a lender the agency approved, which is why program and loan get chosen together.

What decides an offer’s real cost is how it gets repaid, because only one of these four structures is free money. Get the answer in writing. Our guide to how to save for a down payment covers what still comes from you.

A fifth form of help is the first mortgage itself, funded through bond authority and priced differently from the same lender’s standard offering. Many agencies also issue mortgage credit certificates, converting part of your annual mortgage interest into a dollar-for-dollar federal tax credit.¹ Our roundup of first-time home buyer grants and programs compares the structures.

Why every state’s rules look almost identical

Because most state assistance is financed with tax-exempt qualified mortgage bonds, and federal tax law sets the outer limits on who can be helped. Learn the statute and you can predict a program’s rules in any state.

• The three-year rule: Under 26 U.S.C. § 143(d)(1), at least 95% of a bond issue’s net proceeds must finance buyers with no present ownership interest in a principal residence at any time during the three-year period ending on the date the mortgage is executed. That’s why “first-time buyer” almost always means “hasn’t owned in three years.”
• Income ceilings: Section 143(f) caps family income at 115% of applicable median family income, rising to 140% in targeted areas, where one-third of the financing carries no income limit.
• Purchase price caps: Section 143(e) limits acquisition cost to 90% of average area purchase price, 110% in targeted areas. That’s why every agency publishes a sales price limit beside its income chart.
• Built-in exceptions: Section 143(d)(2) exempts targeted-area residences, qualified home improvement and rehabilitation loans, and financing for a veteran who hasn’t previously used it. That’s the root of the veteran and targeted-area waivers states advertise.

Locally funded county, city, and nonprofit programs often borrow HUD’s definition instead: under 24 CFR § 92.2, a first-time homebuyer hasn’t owned a home in the three years before purchase, with displaced homemakers and single parents included. Different rulebook, same window.

Do you qualify for mortgage assistance?

Five requirements show up on nearly every application, and income disqualifies people far more often than credit does. Clear these and the paperwork is short, because assistance underwrites alongside your first mortgage.

• Income under the county limit: Limits are set by household size and county, not one flat statewide number. MSHDA’s non-targeted limit in the balance of Macomb County is $104,800 for a 1 – 2 person household and $120,520 for three or more, well above local median income.
• A purchase price at or below the cap: Michigan’s statewide sales price limit is $566,355, effective June 1, 2026. Targeted areas get a higher cap.
• First-time buyer status, usually: No ownership interest in a principal residence for three years. Veterans and targeted-area buyers are frequently exempt, and some states drop it entirely.
• A credit score at the program floor: 640 is the number to plan around. It’s MSHDA’s minimum for the MI Home Loan and a common floor across agencies, even though FHA insures at 580 with 3.5% down.
• Education and owner occupancy: Treat the class as a hard eligibility item with a dated certificate, not a formality. The home must be your primary residence, which rules out second homes and rentals.

Some programs also look at what you hold, not only what you earn, so ask each one how it treats savings before you move money around. Our walkthrough of first-time home buyer programs covers how the gates interact.

What assistance looks like in California, Texas, Florida and New York

Four states, four structures, none alike. The flagship offering in each shows why “down payment assistance” tells you almost nothing until you read the lien terms.

The lesson carries anywhere: New York’s 0.40% rate adjustment and Florida’s amortizing second are real costs a headline dollar figure hides.

Help for homeowners already behind on payments is a separate track, and it’s contracting. The federal Homeowner Assistance Fund, authorized at $9.961 billion under the American Rescue Plan Act, is scheduled to end in September 2026 or whenever a state exhausts its funds. To keep a home rather than buy one, start with HUD’s foreclosure-avoidance resources and counselor hotline.

How state assistance stacks on FHA, VA, USDA and conventional loans

State assistance sits behind a first mortgage, so the first mortgage sets the down payment and the assistance decides how much of it you pay.

• FHA: 3.5% minimum down payment with a 580 credit score, against a statutory maximum loan-to-value of 96.5%. Scores of 500 – 579 need 10% down. FHA is the most commonly paired first mortgage because it accepts down payment help from a governmental entity.²
• VA: No down payment and no monthly mortgage insurance for eligible veterans, service members, and surviving spouses with full entitlement. VA sets no maximum loan amount for full entitlement and no minimum credit score; any score floor you’re quoted is a lender overlay. The trade-off is the funding fee, a percentage of the loan amount that varies by use and down payment and is waived for veterans receiving VA compensation for a service-connected disability.³
• USDA Guaranteed: 100% financing in eligible rural areas for households up to 115% of applicable area median income, as a 30-year fixed loan with a 90% loan note guarantee backing the lender. See USDA loan basics.
• USDA Section 502 Direct: A different program with different math. USDA lends directly to low- and very-low-income applicants and applies payment assistance, a subsidy sized to adjusted family income, over a 33-year term, or 38 years when adjusted income doesn’t exceed 60% of area median and the longer schedule is needed to qualify. Guaranteed limits don’t apply here. See recent changes to USDA loan programs.
• Conventional: 3% down through Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, both capped at 80% of area median income, with reduced mortgage insurance and gifts or grants accepted as your down payment.

Because Align Lending is a broker, we place all of these through partner lenders, including USDA loans many retail banks don’t originate. Our USDA and assistance programs hub maps the combinations, and buying a home with a low down payment compares costs.

How to apply for state mortgage assistance, step by step

Plan on six steps and a few weeks, not a few days, mostly because of the education certificate and the funding reservation.

• 1. Find your state housing finance agency: Every state has one, and it’s the front door for statewide programs. Work outward to county and city housing offices, where the largest awards often hide.
• 2. Pull the current income and price charts: Get limits for your county and household size from the agency. They’re revised at least annually, and targeted-area designations raise both ceilings.
• 3. Apply through an approved lender, not the agency: This trips up more buyers than any other step. Agencies don’t take retail applications, and not every lender is approved for every layer. Pick the program before the lender.
• 4. Complete homebuyer education in week one: Certificates are dated and some programs require a live class. Find a provider through HUD-approved housing counseling or call 800-569-4287, at little or no cost.
• 5. Reserve the funds at lock: Most agencies commit assistance first-come at loan reservation, so your file has to be far enough along to lock. Waiting for the perfect house can cost you the money.
• 6. Read the recorded lien before closing: Confirm the repayment trigger, the forgiveness schedule, and whether refinancing later forces a payoff.

Two mistakes cost buyers most: assuming a high income disqualifies them before checking the county chart, and leaving the education class to the last minute. Our 15 first-time home buyer tips cover the sequencing, and our first-time home buyers hub the rest.

What Michigan buyers should know

Michigan’s assistance runs through the Michigan State Housing Development Authority, and the stack is simple enough that most buyers can tell in five minutes whether they fit.

• MI Home Loan: MSHDA’s first mortgage, for first-time buyers statewide and repeat buyers in targeted areas, minimum credit score 640. It can be structured as conventional, FHA, VA, or USDA Rural Development financing.
• MI 10K DPA Loan: Up to $10,000 toward down payment, closing costs, and prepaids, statewide, as a 0% non-amortizing second, repaid when you sell, refinance, pay off the first mortgage or stop living in the home. It must pair with an MI Home Loan.
• Income and price limits: The statewide sales price limit is $566,355 effective June 1, 2026. Income limits vary by county, household size, and targeted-area status, running $104,800 and $120,520 in the balance of Macomb County.
• Homebuyer education: Every MI 10K DPA borrower completes a class through a HUD-approved counseling agency, and the certificate goes to underwriting with the credit file.
• Mortgage credit certificate: MSHDA issues MCCs worth 20% of annual mortgage interest to first-time buyers statewide and repeat buyers in targeted areas. See first-time home buyer tax credits.

Here’s how the math lands. On a $250,000 Waterford home with FHA financing, the 3.5% minimum down payment is $8,750. A $10,000 MI 10K DPA Loan covers all of it and leaves roughly $1,250 toward closing costs, while the 1% contribution puts $2,500 of your own money back in.⁴

One honest caution. Assistance money is appropriated, and appropriations run out: MSHDA’s First-Generation pilot offered $25,000 and closed once its funding was exhausted. Confirm availability at MSHDA’s homeownership programs, not on any blog post, this one included.

FAQ: State mortgage assistance programs

Here are answers to common questions about state-specific mortgage assistance programs.

What is the difference between a grant and a deferred-payment loan?

A grant is money you never repay, with no lien recorded. A deferred-payment loan also carries no monthly payment, but the balance sits as a lien and comes due when you sell, refinance, or stop occupying the property. Many are 0% interest, and some forgive entirely after a set number of years. Our guide to first-time home buyer grants and programs compares all four structures.

Can you combine state assistance with an FHA or conventional loan?

Yes, and that’s how most programs are designed. State assistance layers on an FHA, VA, USDA, or conventional first mortgage originated through the agency’s approved lender network, covering the down payment and closing costs that mortgage requires. See buying a home with a low down payment for how each first mortgage prices out.

Do you need perfect credit to qualify for mortgage assistance?

No. Most state programs set minimum credit scores around 640, well below “perfect,” and pair the requirement with homebuyer education. Income limits matter more: these programs target low- and moderate-income households, so earning too much disqualifies far more applicants than a mediocre score. Our overview of first-time home buyer programs lists the credit floors.

Are state mortgage assistance programs only for first-time buyers?

Mostly, but not exclusively. Programs commonly use the three-year rule, and federal bond law expressly exempts targeted-area purchases and qualifying veterans. Texas drops the requirement altogether. Check your agency before assuming you’re ineligible, and see our first-time home buyers hub for the rest of the picture.

The bottom line on state mortgage assistance

Every state runs a housing finance agency offering a below-market first mortgage paired with down payment help, delivered as a grant or a deferred-payment second loan that charges nothing monthly and is repaid only when you sell or refinance. Amounts commonly run from a few thousand dollars to 3% – 5% of the purchase price, and Michigan’s MI 10K DPA Loan lends up to $10,000 statewide at 0%. Expect four gates: an income limit, a purchase price cap, a homebuyer education certificate, and owner occupancy, with credit floors commonly at 640. Then ask the question that decides what the help really costs: grant, forgivable loan, or lien that comes due at sale?

If you’re ready to find out which assistance programs your file actually clears, talk to Align Lending, we’ll shop your scenario across our lender network, layer the assistance you qualify for, and show you the cash-to-close numbers side by side. Call 248-506-5727 or start online today.

Footnotes:

1. This is general information, not tax advice. Mortgage credit certificate eligibility, the value of the credit, and recapture rules are governed by federal tax law and administered by the issuing housing finance agency. Consult a qualified tax professional about your situation. Return to text.

2. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA minimum required investment, credit score, loan-to-value, and acceptable-source-of-funds requirements are set by HUD and are subject to change. Return to text.

3. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. VA entitlement, funding fee amounts, and fee exemptions are set by the Department of Veterans Affairs and are subject to change; credit score minimums referenced are lender overlays, not VA requirements. Return to text.

4. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your loan amount, assistance eligibility, and cash to close depend on your application, the property, program funding at the time of reservation, and market conditions. Return to text.

Figures current as of August 2026; program amounts, income limits, and sales price caps are revised at least annually, so verify with the linked source or the administering agency before you rely on them.

Sources: qualified mortgage bond three-year requirement (95% of net proceeds to mortgagors with no present ownership interest in a principal residence at any time during the 3-year period ending on the date the mortgage is executed), 26 U.S.C. § 143(d)(1); exceptions for targeted area residences, qualified home improvement and rehabilitation loans, and qualifying veterans, 26 U.S.C. § 143(d)(2); purchase price limit of 90% of average area purchase price and 110% in targeted areas, 26 U.S.C. § 143(e); income limit of 115% of applicable median family income, 140% in targeted areas with one-third of targeted-area financing exempt, 26 U.S.C. § 143(f). First-time homebuyer definition including displaced homemakers and single parents, 24 CFR § 92.2 (U.S. Department of Housing and Urban Development). FHA 3.5% minimum down payment, 96.5% statutory maximum loan-to-value, 580 minimum decision credit score for maximum financing and 10% down at 500 – 579, and governmental entity down payment assistance as an acceptable source, HUD FHA Answers and HUD Single Family Housing Policy Handbook 4000.1. VA no-down-payment purchase loans with full entitlement, absence of a VA-set maximum loan amount or minimum credit score, funding fee as a percentage of the loan amount varying by use and down payment, and the exemption for veterans receiving compensation for a service-connected disability, U.S. Department of Veterans Affairs. USDA Single Family Housing Guaranteed Loan Program 100% financing, 115%-of-area-median-income limit, 30-year fixed term and 90% loan note guarantee; Section 502 Direct low- and very-low-income eligibility, payment assistance subsidy, and a 33-year term extending to 38 years when adjusted income does not exceed 60% of area median and the longer term is needed for repayment, USDA Rural Development; 7 CFR 3550.68. HomeReady and Home Possible 3% down payment and 80%-of-area-median-income limits, Fannie Mae and Freddie Mac. MSHDA MI Home Loan 640 minimum credit score, first-time buyer and targeted-area eligibility, and $566,355 statewide sales price limit effective June 1, 2026; MI 10K DPA Loan of up to $10,000 statewide as a 0% non-amortizing second, repaid on sale, refinance, payoff of the first mortgage or end of owner occupancy and homebuyer education requirement; Macomb County non-targeted income limits of $104,800 and $120,520; 20% mortgage credit certificate; and the closed First-Generation down payment assistance pilot, Michigan State Housing Development Authority. MyHome Assistance Program deferred-payment junior loan of up to the lesser of 3.5% (FHA) or 3% (conventional) of purchase price or appraised value, silent-second structure, and homebuyer counseling certificate requirement, California Housing Finance Agency. Home Sweet Texas and Homes for Texas Heroes down payment assistance of up to 5% of the loan amount as a grant or three-year deferred forgivable second lien with no first-time buyer requirement, Texas State Affordable Housing Corporation. Florida Assist deferred 0% second mortgage of up to $10,000, not forgivable and due in full on sale, refinance, transfer or when the home is no longer owner-occupied, and the Florida Homeownership Loan Program (FL HLP) second mortgage of up to $10,000 as a fully amortizing 3% loan over a 15-year term, Florida Housing Finance Corporation. SONYMA Down Payment Assistance Loan equal to the greater of $3,000 or 3% of purchase price up to $15,000, 0% interest forgiven at 1/120 per month over 10 years, 1% minimum borrower cash contribution, 0.40% rate adjustment, and DPAL Plus up to $30,000, New York State Homes and Community Renewal. Homeowner Assistance Fund authorization of $9.961 billion under the American Rescue Plan Act and scheduled program end in September 2026 or upon exhaustion of state funds, U.S. Department of the Treasury. HUD-approved housing counseling availability at little or no cost and the 800-569-4287 counselor line, HUD.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Assistance program terms, funding availability, income and sales price limits, lien terms, and tax treatment vary by agency and county and change without notice; confirm current terms with the administering agency and consult a qualified professional about your situation. Program figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

Related resources

12-minute read

A guide to low-down-payment mortgages: your options from 0% to 3.5%

Compare low-down-payment mortgages (conventional at 3%, FHA at 3.5%, VA and USDA at 0%) plus credit minimums, mortgage insurance costs and down payment help.

Read more

14-minute read

What Is a Renovation Loan? How to Finance a Home and Its Remodel Together

See how renovation loans finance a home purchase and remodel in one mortgage using after-improved value, and compare 203(k), HomeStyle and HELOC options.

Read more

13-minute read

Adjustable-rate mortgages: pros and cons every home buyer should weigh

Compare the pros and cons of adjustable-rate mortgages, including lower intro rates, the caps that limit increases, and the risk after the fixed period.

Read more

3-minute read

How to Use Your 401(k) to Finance a Home: Smart Buyer Guide

Discover how to finance a home purchase with a 401(k) and navigate mortgage rules. Learn more now!

Read more