Montana Board of Housing Loans and Income Limits: The MBOH 80/20 Program Explained

The Montana Board of Housing (MBOH) doesn't hand out free money — but it does offer a program that eliminates private mortgage insurance entirely while keeping your down payment requirement low. That's a meaningful monthly savings in a state where median home prices range from $432,000 in Billings to $779,000 in Bozeman.

Here's how the flagship MBOH 80/20 program works, what the income limits are by household size, and how the down payment assistance layer fits in.

The 80/20 Structure: Why No PMI

Conventional lenders require private mortgage insurance (PMI) when a borrower's down payment is less than 20% of the purchase price. PMI protects the lender, not you — and it adds $100–$300/month to a typical Montana mortgage payment, depending on loan size and credit score.

MBOH's 80/20 program eliminates PMI by structuring the financing as two loans instead of one:

First loan (80% LTV): A conventional loan at 80% of the purchase price, originated through a participating lender. Because the loan-to-value is exactly 80%, no PMI is required on the first loan.

Second loan (20% LTV): A subordinate loan from NeighborWorks Montana or a local Human Resource Development Council (HRDC) covering the remaining 20%. This second loan carries its own terms, which are typically below-market rates, and is subordinate to the first mortgage.

The buyer's required cash contribution is minimal — just $1,000 minimum, which can come from gift funds. The two loans together cover 100% of the purchase price, PMI is eliminated because the first loan is at 80% LTV, and the buyer brings very little cash to close.

On a $400,000 home at an average PMI rate of roughly 0.7% annually, eliminating PMI saves approximately $233 per month. Over five years, that's nearly $14,000 in savings — money that would have gone entirely to the lender and produced no equity.

Income Limits by County and Household Size

MBOH income limits vary by county and household size, set to reflect local area median incomes. The current limits:

1–2 person households:

• Most Montana counties: $95,000
• Higher-cost counties: up to $118,200

3+ person households:

• Most Montana counties: $109,000
• Higher-cost counties: up to $137,900

Gallatin County (Bozeman area), all household sizes:

• Up to $142,800

Gallatin County's elevated limits acknowledge that Bozeman's labor market draws substantially higher incomes — and that the median home price of $702,000–$779,000 requires higher income to qualify. The elevated income limit makes the program accessible to buyers in Bozeman who would be disqualified by standard county limits.

These limits apply to the gross household income of all borrowers on the loan. Non-borrowing household members' income is generally not counted, which distinguishes MBOH from USDA (where all household member income counts regardless of whether they're on the loan).

Minimum Credit and DTI Requirements

MBOH 80/20 qualifying parameters:

Minimum credit score: 620–640 depending on the participating lender. Some lenders require 640; confirm with your specific lender before assuming the lower threshold applies.

Maximum debt-to-income ratio: 45% total DTI. This is the housing payment plus all monthly debt obligations (student loans, car payments, minimum credit card payments) divided by gross monthly income. At 45%, MBOH is slightly more flexible than USDA's preferred 41% but requires keeping overall debt manageable.

First-time buyer requirement: MBOH's primary programs are limited to borrowers who have not owned a principal residence in the past three years. There are targeted area exceptions — buyers purchasing in designated federally targeted census tracts are exempt from the first-time buyer requirement.

Homebuyer education: MBOH requires completion of an approved homebuyer education course before closing. This can typically be completed online in a few hours.

Purchase Price Caps

MBOH programs cap the maximum purchase price to prevent the subsidy from benefiting buyers purchasing at the top of the market:

• Rural areas: $544,232
• Targeted/high-cost areas: $783,192

Most Montana communities fall under the rural cap. The targeted area designation applies to specific census tracts and can be confirmed with a participating lender.

In Bozeman, where median prices frequently exceed $700,000, the rural cap of $544,232 excludes a significant portion of the market. Buyers there should verify whether their target neighborhood falls within a targeted area (allowing the higher cap) or plan for a conventional financing strategy.

MBOH Down Payment Assistance: Up to $15,000

In addition to the 80/20 structure, MBOH offers a separate Down Payment Assistance (DPA) program:

• Amount: up to 5% of the sales price, capped at $15,000
• Structure: 0% interest deferred loan (no monthly payment, no interest accruing)
• Repayment: due when you sell, refinance, or the home is no longer your primary residence

A deferred 0% loan is effectively free money for as long as you stay in the home. There's no monthly cost, no interest accumulation, and no time pressure to repay beyond the trigger events. For a buyer purchasing at $300,000, the maximum DPA is $15,000 — which covers most or all of the remaining cash needed at closing beyond the $1,000 minimum contribution.

The DPA can be layered with the 80/20 program or used independently with qualifying conventional financing. The income and purchase price limits are the same as the primary 80/20 program.

How to Access MBOH Programs

MBOH programs are not available directly from MBOH — they're delivered through a network of participating lenders across the state. These include community banks, credit unions, and mortgage companies that have been approved to originate MBOH products.

Start by contacting MBOH directly (housing.mt.gov) for the current list of participating lenders in your county. Not every mortgage lender in Montana offers MBOH products — if you approach a lender who doesn't participate, they simply can't originate these loans. Shopping for a participating lender is the necessary first step.

The homebuyer education requirement (MBOH-approved course) should be completed before you're under contract, not after — some lenders want to see your education certificate before issuing pre-approval.

The Montana First-Time Home Buyer Guide includes a detailed walkthrough of the MBOH application process, how the 80/20 second loan interacts with your monthly payment calculation, and a comparison showing the total cost of MBOH vs. conventional financing at different price points.

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