The Michigan State Housing Development Authority has expanded a new down payment assistance program, and an affordable housing nonprofit plan to help educate interested buyers.

The program, called MI Next Home, provides $7,500 or 4 percent of the home purchase price in down payment assistance, whichever is less, according to MSHDA’s website. Buyers also can use the money to pay closing costs, taxes and insurance.

There are limits, both on the prospective home buyer and loan types, but Northern Homes Executive Director Jane MacKenzie said she’s excited by the new offering. It could help those looking to move up to their next house, or retired parents whose children have moved out to buy a smaller one.

“I think that really helps out the whole housing market in general,” she said.

Northern Homes is providing foreclosure counseling, both for mortgages and property taxes, to Northeast Michigan for several months now. It’s a result of Northeast Michigan Affordable Housing folding, and MacKenzie said her Boyne City-based nonprofit plans on providing this help until the end of 2014.

The organization also plans to offer home buying education and financial management classes as well, MacKenzie said, including some in Rogers City and Alpena. A schedule hasn’t been set yet. These classes are required to receive down payment assistance, according to MSHDA’s website.

Banks and lenders are signing up to assist MSHDA with the program, including some with branches in Alpena like FirstMerit Bank, Chemical Bank and PNC Bank.

The new MSHDA program is for anyone who previously owned a home, according to the authority’s website. There’s a $59,600 income limit for a one- to two-person household and a sale price limit of $224,500 for non-targeted areas, including Alpena County.

A targeted area has been federally designated as one with slow economic growth, and where requirements to be a first-time home buyer is waived for certain other MSHDA programs, according to the authority’s website, including Alcona, Montmorency and Presque Isle counties. In these counties, the income limits are $71,520 for a one- to two-person household and the house sales price limit is $224,500.

There’s also an asset limit of $7,500, including any equity a homeowner has in their current home, MSHDA Homeownership Division Program and Business Development Manager Carol Brito said. Only one qualified borrower is required. That means they have to have a minimum credit score of 640, or 660 for manufactured homes.

MI Next House also has no acreage restriction, although different lenders might limit a sale based on the value of the house relative to the land around it, Brito said. The house also must be the buyer’s primary residence.

For now, the program is only for government-backed loans through the Federal Housing Administration, United States Department of Agriculture Rural Development or the United States Department of Veterans Affairs, Brito said. MSHDA would like to eventually expand it to conventional loans, which typically require 20 percent of the house purchase price for a down payment.

The mortgage assistance exists as a second lien on the home, what Brito referred to as a “soft second.” No payments are due and no interest builds, but it must be paid back when the house is sold or the buyer who received the assistance refinances to a different type of loan.

“In the meantime, it’s still a great down payment even though it’s not forgivable, because there is no interest accruing and no payments that are needed,” she said.

MSHDA is financing the program using mortgage-backed securities, Brito said. The authority finances certain other programs by selling taxable and non-taxable bonds.

Brito said she believes the new program is a good way to solve some of the stumbling blocks preventing many homeowners from qualifying for other MSHDA programs. More than 1 million homeowners in the state could qualify, according to a release.

“With just a few little tweaks and different guidelines, all the sudden you’re including more people than you’d expect,” she said.

Jordan Travis can be reached via email at jtravis@thealpenanews.com or by phone at 358-5688. Follow Jordan on Twitter @jt_alpenanews. Read his blog, A Snowball’s Chance, at www.thealpenanews.com.