South Lyon has a charm that is hard to replicate. You get that genuine small-town feel with the Pumpkinfest and the Witch’s Hat Depot, yet you are still close enough to Ann Arbor and Detroit for an easy commute. It is no secret that people want to live here, and that demand has pushed home prices up over the last few years.
For many buyers, the monthly mortgage payment is not the biggest scary part – it is the upfront cash. Coming up with a down payment plus closing costs can feel like an impossible hurdle, especially if you are currently renting. But here is the good news: there are multiple layers of financial aid available right now. From specific Oakland County grants to state-level programs that finally work for our local price points, you have options to help bridge that gap.
Let’s look at where the money is hiding and how you can use it to get into one of the homes for sale in South Lyon MI without draining your savings account.
Oakland County Exclusive Programs
When looking for assistance, it pays to start local. Oakland County has resources that are specifically designed to help residents get into homeownership, and they are often less competitive than the big national programs.
One of the best-kept secrets is the Oakland County Treasurer’s Home Buyer Assistance Program. This initiative is designed to help you cover those pesky closing costs or boost your down payment. The county partners with specific lenders – currently Independent Bank – to offer a grant of up to $5,000. Since it is a grant, not a loan, you typically do not have to pay it back as long as you meet the residency requirements.
To qualify for this, you generally need to be a first-time homebuyer purchasing a property within Oakland County. There are income limits, but they are quite generous – usually around 120% of the Area Median Income. For a family of four, that cap sits around $123,000. The catch is that you usually must finance your mortgage through their partner bank to access the funds, so you will want to ask a loan officer at Independent Bank specifically about the “Oakland County grant.”
Michigan State Housing Development Authority (MSHDA) Options
If you looked at state assistance a few years ago, you might have been disappointed. For a long time, the Michigan State Housing Development Authority (MSHDA) had a sales price limit around $224,000. In the South Lyon market, finding a move-in ready home at that price point was like finding a needle in a haystack.
That has changed in a big way for 2026. MSHDA raised their sales price limit significantly – now up to approximately $544,233. This is a game-changer. It means the vast majority of homes in South Lyon and Lyon Township are now eligible for state assistance programs.
Here is how the MSHDA programs break down for a typical buyer:
The MI 10K DPA Loan This is the most popular tool. It provides up to $10,000 in down payment assistance. It is technically a loan, but it comes with 0% interest and no monthly payments. You only pay it back when you eventually sell the house, refinance, or pay off your main mortgage. It essentially acts as a silent second mortgage that lowers your upfront cash requirement.
First-Generation Homebuyer Grant If your parents did not own a home, or if you were in foster care, you might qualify for the First-Generation Homebuyer program. This is a grant of up to $25,000. Unlike the $10,000 loan, this money does not always have to be paid back if you stay in the home for a certain number of years. However, funding for this pilot program is limited and depletes quickly, so you need to check its current status immediately.
Mortgage Credit Certificate (MCC) This isn’t cash for closing, but it saves you money long-term. The MCC creates a federal tax credit for a portion of the mortgage interest you pay every year. It reduces your annual tax liability, effectively boosting your take-home pay, which can help lenders qualify you for a slightly higher loan amount.
USDA Rural Development Loans in South Lyon
Most people think of USDA loans as something for far-out farmland, but South Lyon sits in a unique “sweet spot.” Because we are on the edge of the metro area, parts of our community still qualify as “rural” under federal definitions.
A USDA Rural Development loan is practically a secret weapon for buyers here. It offers 0% down payment – meaning you can finance 100% of the home price. The mortgage insurance rates are also typically lower than FHA loans.
There is a catch: eligibility is strictly geographic. The 48178 zip code is right on the borderline. A house on one side of Pontiac Trail might be eligible, while a subdivision across the street is not. Before you fall in love with a listing, go to the USDA Property Eligibility Map online and type in the specific address. If it shows as “eligible,” you could buy that home with zero money down.
FHA, VA, and Conventional 97 Options
Not everyone qualifies for the specific grants mentioned above. Maybe your income is slightly too high for MSHDA, or the house you want isn’t in the USDA zone. That is okay – standard low-down-payment loans are still fantastic options.
FHA Loans The Federal Housing Administration backs these loans, allowing you to buy with just 3.5% down. They are very forgiving regarding credit scores, often accepting scores of 580 or higher. If you have had some credit bumps in the past, this is often the best route.
VA Loans South Lyon has a strong veteran community, and if you have served, the VA loan is unbeatable. It offers 0% down payment and no monthly mortgage insurance. It is hands-down the best loan product available, so if you are eligible, use it.
Conventional 97 / HomeReady If you have strong credit but just lack savings, look at “Conventional 97” programs (like Fannie Mae HomeReady). These allow for a 3% down payment. The advantage here over FHA is that the mortgage insurance can eventually be canceled once you build enough equity, whereas FHA mortgage insurance usually sticks around for the life of the loan.
Local Repair Grants: City of South Lyon vs. Lyon Township
Once you buy the home, the expenses do not stop. Sometimes the only way to afford a home in this market is to buy a fixer-upper. If you find yourself needing repairs down the road, it is important to know who to ask for help, and that depends entirely on your address.
We have two separate municipalities here: the City of South Lyon and Lyon Township.
If you live in Lyon Township, you may be eligible for “Minor Home Repair” grants funded through Community Development Block Grants (CDBG). These are for low-to-moderate-income homeowners who need help with critical repairs like furnaces or roofs.
If you live within the City of South Lyon, you typically access repair funds through Oakland County’s Community Home Improvement division. They offer interest-free loans for repairs that are deferred—meaning you pay nothing until you sell the home.
Also, a quick clarification: The South Lyon Housing Commission exists, but they primarily manage housing vouchers and rental assistance (public housing). They generally do not provide grants for purchasing homes.
How to Apply for Assistance
Getting this money requires a bit of strategy. You cannot just make an offer on a house and then ask for the grant later. You have to set it up from the start.
Step 1: Find the right lender. Not every bank participates in MSHDA or the Oakland County grant program. When you contact a real estate agent or a loan officer, ask them specifically: “Are you a participating lender for MSHDA or the Independent Bank partnership?” If they say no, you might need to look elsewhere to access those specific funds.
Step 2: Check your income. Most of these programs have household income limits. For 2026, check where your household income falls compared to the Oakland County limits (often around $91,000 to $174,000 depending on the program and family size).
Step 3: Take the class. Almost every down payment assistance program requires you to take a Homebuyer Education course. These can usually be done online or through local non-profits. Get this done early so it doesn’t hold up your closing.
Step 4: Get pre-approved. Sellers in South Lyon want to know you are solid. A pre-approval letter that specifically references your financing type (including any grants) shows them you have done your homework and the money is ready to go.
Frequently Asked Questions
Is South Lyon considered rural for USDA loans?
It depends on the specific street. While much of the 48178 zip code falls into eligible rural areas, the more densely populated sections near downtown or established subdivisions may not. You must check the specific address on the USDA eligibility map to be sure.
What is the income limit for down payment assistance in Oakland County?
For the Oakland County/Independent Bank grant, the limit is approximately 120% of the Area Median Income, which is roughly $123,000 for a family of four. MSHDA income limits vary by family size but generally range between $91,000 and $174,000.
Can I use MSHDA programs if I’m not a first-time buyer?
Yes, in certain cases. While most down payment assistance is reserved for first-time buyers, MSHDA has “Targeted Areas” where repeat buyers can qualify. However, South Lyon is generally not a targeted area, so repeat buyers here would typically use the MI Home Loan without the down payment assistance add-on.
Does the City of South Lyon give free land or money to homebuyers?
No, the City municipal government does not give free land or cash directly to homebuyers. Financial aid comes from Oakland County, the State of Michigan (MSHDA), or the Federal government, not the local city budget.
