The name Michigan is derived from the Native American word for great or large lake. It’s no wonder: The state is bordered by four of the five Great Lakes. Its largest city, Detroit, known as the home of the auto industry, is also the location of the renowned Detroit Institute of Arts. With a population of nearly 9.9 million, Michigan is the 10th most populous state in the country.
Homes in Michigan are more affordable than in many states. The average sales price in Michigan in March 2019 was $171,110, according to the Michigan Realtors. That’s significantly lower than the national median sales price of $259,400.
Statewide, the housing market has slowed in Michigan, with the number of sales down 4.19% in March 2019 compared with March 2018. Average sales prices declined by 22.78% during that same time period, according to the Michigan Realtors.
Housing markets vary in a state as large as Michigan though. For example, in Ann Arbor, the home of the University of Michigan, average sales prices for single-family homes rose by 6.2% over the last year, to $347,850 as of April. In Grand Rapids, the number of homes sold declined by 9.3% in April 2019 compared to April 2018, but prices rose 5% to $225,736. In both cities, rising prices indicate a seller’s market.
Buyers in Michigan have strong protection because of property disclosure laws in the state that require sellers to provide any knowledge of defects in their home and in the surrounding area. Other laws in Michigan regulate the foreclosure process and allow title companies, rather than attorneys, to handle real estate closings. Michigan also allows courts to determine how to separate property, including real estate, in the event of a divorce.
Real estate transfer taxes in Michigan include both a state transfer tax of $3.75 for every $500 of property value transferred and a county tax imposed by most counties of $0.55 for every $500 of property value. The value is based on the sales price of the property. Your lender is responsible for telling you the exact amount of transfer tax required when you identify a specific property. Typically, sellers in Michigan pay the transfer tax unless otherwise agreed to by the buyers. There are some exemptions for transfer taxes depending on how the property is transferred.
Property taxes vary by county in Michigan, averaging around 1.62% of the median home value, according to Tax-Rates.org. Property taxes are around 0.86% in Luce County, which has the lowest rates in the state, and go as high as 1.81% of the median home value in Washtenaw County, where the University of Michigan is located.
Some homeowners may be exempt from property taxes under certain circumstances. Michigan has a Principal Residence Exemption (PRE), which reduces the burden of local property taxes. In addition, homeowners may be eligible for a homestead property tax credit depending on their income. Seniors are exempt from paying the amount of property taxes that exceeds 3.5% of their income, up to $1,200. Property tax exemptions are also available for active-duty military personnel and for disabled veterans.
The conforming loan limit across Michigan is $484,350 for a one-unit home. While loan limits can vary by county across the country, particularly in higher-cost counties, they are consistent in every county in Michigan.
Conforming loan limits refer to the maximum amount that you can get a loan for under government-sponsored entities Fannie Mae and Freddie Mac. Any amount borrowed above this limit is considered a jumbo loan. Conforming loans generally offer the lowest interest rates for borrowers with good or excellent credit. Jumbo loans, which are considered riskier because they involve more money, can be more difficult to qualify for and may have higher interest rates.
A variety of programs are available to help residents become homeowners in Michigan. Most are limited to first-time homebuyers, with exceptions made for buyers who purchase homes in areas targeted for revitalization. The programs include down payment assistance and tax credits. Other homebuyer programs include city programs and national programs, such as Habitat for Humanity and USDA loans.
The MI Home Loan program provides down payment assistance of up to $7,500 for eligible homebuyers who take a homebuyer education class.
Who qualifies:
The Mortgage Credit Certificate (MCC) program provides a dollar-for-dollar tax credit equal to 20% of the annual mortgage interest paid on the borrowers’ loan. The MCC can be claimed every year for the life of the loan.
Who qualifies:
The Homebuyer Assistance Fund provides up to $7,500 in funds to be used for a down payment, closing costs or prepaid expenses.
Who qualifies:
The Detroit Home Mortgage Program allows homebuyers to finance up to $75,000 more than the appraised value of a property with two loans. The first loan is for 96.5% of the home value and the second is for the amount above the appraised value up to $75,000. Down payment assistance may also be available from participating banks.
Who qualifies:
Shopping for a loan may not sound as fun as shopping for clothes or a shiny new car, but you can save a lot of money over the life of your loan if you compare rates from several lenders. Here are some tips to keep in mind as you begin shopping around.
Gather all your information in advance
To give you a quote, a lender will need your basic contact information, employer verification contact, bank statements, pay stubs and Social Security number. Make sure you have everything you need at your fingertips before you call.
Contact potential lenders on the same day
Contacting several lenders on the same day has two big benefits. First, creditors will realize you’re shopping for rates, not applying for multiple loans, if they see that all credit queries were made at the same time. Second, mortgage rates change daily, so for an accurate comparison, you need to check them when all rates are being influenced by the same economic factors.
Be consistent with your facts for each lender
Ask each lender about the same type of loan for the same amount with the same down payment and loan terms so you’re comparing apples to apples when you look at rates. Even a small difference in what you’re asking for could change the rate you’re quoted.
Pay attention to fees
The annual percentage rate (APR) includes all fees as well as the interest rate, so it’s the most accurate figure for comparison purposes. Before filling out a mortgage application, it’s important to make note of the associated lender fees to get an accurate picture of the full cost. While lenders can’t change some fees or expenses, a few are negotiable. Explain that you’re comparing lenders to get the best rate and see what they can offer you to get your business.
Ask about how and when to lock your rate
Each lender may have a slightly different fee — or no additional fee — for locking in a mortgage rate, so it’s smart to ask about how that works. Once you’ve identified the best rate, you can lock it in for a set period of time. You won’t have to worry about rates rising. On the other hand, if rates decline, you may not benefit unless your lender offers you a float-down option, which allows your lender to offer a lower rate when available.
The information in this article is accurate as of the date of publishing.