The Michigan home buyer’s guide
Buying a house in Michigan, start to finish — whether it is your first, your next, your last, or one you will not live in: what you actually need in cash, what the monthly payment really costs, which loan programs fit, and the Michigan-specific things that catch buyers out — tax uncapping above all. Most of it applies to everyone; the section on your situation covers what does not.
What it costs to buy
Two numbers decide whether you can buy right now, and they are not the same number. The cash to close is what you need in the bank on closing day. The monthly payment is what you live with for the next thirty years. Most buyers are limited by the first and worry about the second — and if you own now, the first usually depends on what your current house sells for, and when.
Cash to close is more than the down payment
Down payment. 3–5% is normal for a first house and 0% for an eligible veteran; a second home, a rental, or a loan above the conforming limit needs more. 20% is not a requirement — it is the point at which conventional loans stop charging mortgage insurance.
Closing costs. Lender fees, title insurance, the closing fee, recording, and the appraisal. Budget roughly 2–5% of the price. In Michigan the seller customarily pays the state and county transfer tax, so that one is not yours.
Prepaids and escrow. Your first year of homeowners insurance, plus several months of taxes and insurance to start the escrow account. This surprises people because it is not a fee — it is your own money, parked.
Earnest money. Paid at offer, not at closing, and credited back to you at the table. It is part of your down payment arriving early, not an extra cost.
Inspection. A few hundred dollars, paid out of pocket, before you know whether the deal survives. Budget for the possibility of paying it twice.
Seller-paid transfer tax
Michigan’s state real estate transfer tax is $3.75 per $500 of value and most counties add $0.55 per $500. Both are customarily the seller’s, which is why Michigan closing costs land at the friendlier end of the national range for buyers. Customary is not mandatory — it is negotiated in the purchase agreement.
Run your own numbers
Set the price and the down payment and both panels update together. Everything below is a planning estimate built from the figures you enter — it is not a quote, a pre-approval, or a Loan Estimate, and the rate is whatever you typed rather than one you have been offered.
Taxes, insurance and the rest
Estimated monthly payment
Estimated cash to close
These are planning estimates
Every figure above comes from the inputs you set, not from a lender, a title company, or an assessor. Real rates depend on credit, loan program, property type, and the day. Real taxes depend on the millage where the house sits and on uncapping — see the Michigan section below. Nothing here is an offer to lend or a commitment to lend. Get a pre-approval for numbers you can act on.
Loan programs in Michigan
There is no best program, only the one that fits your credit, your cash, the house, and whether you will live in it. A broker can price several of these against each other on the same file, which is the whole argument for using one.
| Program | Min. down | Mortgage insurance | Best when |
|---|---|---|---|
| Conventional | 3% | PMI until you reach 20% equity, then it comes off | Decent credit and you want the insurance to eventually stop |
| FHA | 3.5% | Upfront premium plus annual MIP, usually for the life of the loan | Thinner credit or a higher debt load; refinance out later |
| VA | 0% | None — a one-time funding fee instead, waived for some veterans | You are eligible. It is the strongest program on this list |
| USDA Rural | 0% | Upfront and annual guarantee fees, lower than FHA | The address is in an eligible area — much of Michigan outside the metros is |
| Jumbo | 10–20% | Usually none; stricter credit and cash reserves instead | The loan is above the conforming limit FHFA sets each year |
| Bank-statement | 10–20% | Usually none; priced above conventional | You are self-employed and your tax returns understate what you earn |
| DSCR | 20–25% | None | A rental, qualified on the rent it brings in rather than your income |
| MSHDA | Varies | Depends on the underlying loan | You want down payment assistance and meet the income and price limits |
MSHDA down payment assistance
The Michigan State Housing Development Authority runs the state’s first-time buyer programs, pairing a mortgage with down payment assistance carried as a second lien. Eligibility turns on income limits, sales price limits, the county, and a homebuyer education course.
Assistance amounts, income caps and program names change from year to year, and programs open and close — treat anything you read online, here included, as a starting point and confirm the current terms with MSHDA or a participating lender before you count on the money.
“First-time buyer” is looser than it sounds
Most programs define it as not having owned a principal residence in the past three years. If you owned a house years ago, or owned one with an ex-partner, you may well qualify again. It costs nothing to ask.
Principal residence, second home, or investment
Lenders price and approve a loan by how you will use the house, and you sign to it. A principal residence gets the lowest down payment and the best rate. A second home needs more down and has to be a genuine getaway rather than a rental. An investment property needs the most down and costs the most. Telling a lender you will live in a house you plan to rent out is occupancy fraud — it is not a technicality.
Get pre-approved
A pre-approval is the difference between shopping and browsing. It tells you the real number rather than the one you guessed, it tells you which programs you qualify for, and it is what makes your offer credible — in a competitive Michigan market a listing agent will not take an offer seriously without one. Do it before you tour anything, not after you find a house you love.
The form below is the quick first step — a pre-qualification, built from what you tell it. From there we move to a full pre-approval, which is the letter you shop with.
Pre-qualification is prepared by myhomeiq · it is not a credit decision
Pre-qualification, pre-approval, commitment
Pre-qualification is based on what you tell the lender. It is fast and it is a good first filter — that is what the form above is.
Pre-approval means someone has actually looked at your income, assets and credit. This is what you shop with.
Loan commitment comes after underwriting has reviewed the whole file, including the property. This is what closes.
Change nothing about your finances until you have the keys
No new credit cards, no car loan, no financing the furniture, no job change, no large deposits you cannot document, no moving money between accounts for the fun of it. Underwriting re-checks credit and employment shortly before closing, and a new payment discovered at that point can take the loan down days before you were meant to move.
From here to the keys
Roughly six to nine months if you are starting from scratch, or thirty to forty-five days from accepted offer to closing. Tick these off as you go — they save in this browser.
What changes for you
Everything above applies to every buyer. These are the places where your situation changes the money, the loan, or the order you do things in. Read yours; skim the rest — plenty of buyers are two of these at once.
Buying your first house
You are usually limited by cash rather than the monthly payment, so the programs matter most to you: low-down conventional, FHA, and MSHDA assistance above all. Most assistance programs require a homebuyer education course — take it early, it is short, and the certificate is needed before closing.
- Gift money from family is allowed on most owner-occupied loans, but it needs a gift letter and a paper trail. Have it moved before you apply, not the week of closing.
- Keep a reserve after closing. Lenders do not always require one; the first winter usually does.
- You have never paid a property tax bill or an insurance renewal directly. Escrow does it for you, and your payment will move when they do.
Buying while you still own a house
The hard part is not the purchase, it is the order. Your equity is the down payment, and it is locked in a house you still live in. There are four ways through, and the right one depends on the market and on how much risk you can carry.
- Sell first, then buy. Cleanest on paper and the least risk. Negotiate a rent-back or extended occupancy with your buyer so you are not moving twice.
- Buy with a sale contingency. Your purchase depends on your house selling. Easy to write, weak in a competitive market — sellers prefer offers that do not hang on someone else’s buyer.
- Open a HELOC before you list. A home equity line on your current house can fund the down payment on the next one. It has to be opened while the house is not on the market, and it is paid off when it sells.
- Bridge loan, or qualify for both payments. A short-term loan against the house you are leaving, or enough income to carry both mortgages until it sells. Expensive or demanding, but it lets you write a clean offer.
On the selling side, you pay Michigan’s transfer tax, and the federal capital gains exclusion on a principal residence ($250,000 single, $500,000 married filing jointly, if you meet the ownership and use tests) covers most sellers — confirm yours with a tax adviser. The seller’s prep checklist covers the other half of the move.
Buying smaller, often with cash or a large down payment
Downsizers usually have the equity and lack the time pressure — which makes it easy to miss the two things that catch them out.
- A smaller house can carry a bigger tax bill. You leave a house whose taxable value has been capped for years and buy one that uncaps to half its market value. Ask the assessor before you assume the move saves money.
- Qualifying in retirement works differently. Lenders can count Social Security, pensions, and income drawn from retirement assets, and a reverse mortgage can be used to buy (a HECM for Purchase) for borrowers 62 and over. Bring statements, not just tax returns.
- Read the association documents. Most downsizing moves are into condos or 55-and-over communities, and the rules, reserves and fees matter as much as the floor plan — see condos.
Buying from out of state
You are buying in a market you do not know, often on a deadline, sometimes without seeing the house in person.
- A job offer can be enough to qualify. Many loan programs accept a signed offer letter with a start date before your first pay stub. Ask before assuming you have to rent first.
- Pick areas by millage and commute, not by price. Michigan property taxes vary sharply between neighbouring townships and school districts, and the difference shows up in the payment, not the price.
- Inspect for winter. Furnace age, roof and attic ventilation, basement water and the sump pump, and frozen-pipe history. A house toured in July still has to work in February.
- Close remotely if you need to. Video tours, a remote inspection walk-through, and mail-away or remote closings are routinely possible — ask the title company what they support early.
Using a VA loan
If you are eligible, start here. No down payment, no monthly mortgage insurance, and rates that are usually lower than conventional.
- It is reusable. The benefit restores when a VA loan is paid off, and with enough remaining entitlement you can hold a second VA loan while keeping the first house.
- The funding fee is waived for veterans receiving VA disability compensation, and it can be financed for everyone else.
- The VA appraisal checks condition, not just value. Peeling paint, a failing roof or a missing handrail can hold up closing — inspect early so the seller has time to fix them.
Michigan also exempts the homestead of a veteran rated 100% disabled, or paid at that rate, from property tax entirely. It is claimed with the local assessor and has to be filed each year.
Buying from a builder
The builder’s sales office represents the builder. Their contract, their lender and their timeline all favour them, which is fine as long as someone is reading it from your side.
- Bring your agent to the first visit. Many builders will not recognise an agent who was not registered at your first visit, and your agent costs you nothing more on a new build.
- Price the incentive, not the headline. Builder credits tied to their own lender are real money, but compare the whole Loan Estimate against another lender’s. A temporary rate buydown lowers the first year or two; the full payment comes after.
- Inspect it anyway. A pre-drywall inspection and a final inspection catch what the municipal inspection does not. Know what the builder’s warranty covers and for how long.
- The listing’s tax figure is for the lot. In Michigan the first bills often reflect only the land. The full assessment arrives once the house is on the roll — budget for it from day one.
- Long builds outlast rate locks. Ask what an extended lock costs before you sign.
Buying into an association
With a condo you are buying a share of a building and its budget, not just a unit.
- Get the master deed, bylaws, budget, reserve study and recent board minutes. Thin reserves or talk of roofs and parking lots in the minutes means a special assessment is coming.
- Ask what the dues cover and how much they have risen. Put them in the calculator above — they are part of the payment.
- Some loans need the project approved, and investor-heavy or litigated projects can be hard to finance. Ask your lender to check the project before you write.
- Buying a new unit from the developer, the Michigan Condominium Act gives you a short window after you receive the condominium documents to withdraw — read them inside it.
A cottage, a cabin, or a place Up North
Michigan’s lakes make this a common one, and it differs from a primary residence in ways that cost real money.
- No Principal Residence Exemption. A second home pays the non-homestead rate, up to 18 more mills of school tax. Set the calculator’s tax rate accordingly.
- Check short-term rental rules before you count on the income. Many Michigan resort towns restrict or license them, and a second-home loan expects you to use the place, not rent it full time.
- Waterfront needs its own diligence. Flood zone and flood insurance, shoreline and riparian rights, well and septic, seasonal road access, and whether the house is built for winter.
Buying to rent
Investment loans need more down and cost more, and the property has to work on numbers rather than feelings.
- Live in it first. A two- to four-unit building you occupy can be bought with an owner-occupied loan and a far smaller down payment, with the other units helping carry the mortgage.
- Run the numbers at the non-homestead tax rate, after uncapping, with landlord insurance, vacancy, repairs and management. Rents that only cover the mortgage do not cover the property.
- Register before you rent. Detroit and a number of other Michigan cities require rental registration and an inspection before a unit can be lawfully rented, including lead clearance on older housing in Detroit.
- Keeping your old house as a rental? You have to rescind its Principal Residence Exemption, and the lender on your next purchase will want to see a lease and may only count part of the rent.
Paying cash
Cash is the strongest offer you can write, and it removes the lender’s checks along with the lender.
- Keep the inspection, and still buy an owner’s title policy — with no lender, nobody else is checking the title or the condition for you.
- Have proof of funds ready to send with the offer, and confirm wire instructions by phone. A cash closing is one very large wire, which is exactly what fraudsters wait for.
- Want some of the cash back afterward? A conventional cash-out refinance soon after a cash purchase is possible under delayed-financing rules if you document where the money came from. Plan it before you close.
What catches buyers out here
These are the ones that are specific to this state, and the first is the single most expensive surprise a Michigan buyer can hit — first house or fifth.
Taxable value uncapping — the seller’s tax bill is not yours
Under Proposal A, a property’s taxable value can rise each year only by the lesser of inflation or 5% for as long as one owner keeps it. When the house sells, that cap comes off: in the year following the transfer, taxable value resets to the state equalized value, which is roughly half of market value.
If the sellers have owned for twenty years, their taxable value may be far below yours will be, and the tax line on the listing describes their bill, not the one you will get. On a long-held house this can add hundreds of dollars a month. Ask the assessor what the taxable value will be after uncapping before you decide what the house costs — and set the tax field in the calculator above from that number, not from the listing.
File your Principal Residence Exemption
Michigan exempts an owner-occupied principal residence from a portion of the local school operating tax — up to 18 mills. You claim it by filing Form 2368 with the local assessor, and there are set filing deadlines during the year rather than a rolling one. Miss the deadline and you wait for the next window while paying the higher non-homestead rate.
Moving from one Michigan home to another? You can usually keep the exemption on the house you are selling for a limited time while it is on the market, empty and not rented, by filing a conditional rescission. If you keep it as a rental instead, you have to rescind the exemption on it.
Confirm the current deadline and forms with the assessor for the township or city the house is in; the dates have changed before.
Summer and winter tax bills
Michigan bills property tax twice a year rather than once, typically a summer bill around July and a winter bill around December, and different taxing units sit on different bills. How they are prorated at closing is negotiated in the purchase agreement, and Michigan practice varies between due-date and calendar-year methods — two contracts on the same house can split the same bill differently. If your taxes are escrowed this mostly resolves itself, but it does change your cash at closing.
Well, septic, and older housing stock
Several Michigan counties require a well and septic evaluation at transfer, and some municipalities require a pre-sale or occupancy inspection. These book out, so they get scheduled early or they delay closing. Requirements are set locally and change — confirm what applies to the specific address.
Michigan also has a lot of pre-1978 housing, which brings the federal lead-based paint disclosure, and elevated radon in many counties — a radon test is cheap and worth adding to the inspection.
What you should receive from the seller
The Michigan Seller’s Disclosure Statement is required for most residential resales, and the lead-based paint disclosure applies to anything built before 1978. Read both properly. A disclosure that is blank everywhere is itself information.
Michigan does not require an attorney at closing — title companies handle them — but you are free to have one review anything.
Confirm wire instructions by voice, every time
Real estate wire fraud is common and the money is usually unrecoverable. Criminals monitor email around closings and send convincing instructions that change the account at the last minute. Before you send anything, call the title company on a number you looked up independently — never one from the email — and read the details back. Treat any last-minute change of instructions as fraud until a live human tells you otherwise.
The mistakes that cost the most
Glossary
The words that get used at you as though you already know them.
Amortization
How each payment splits between interest and principal. Early on it is nearly all interest; the balance barely moves for the first few years. This is why a shorter term costs so much less in total even though the monthly payment is higher.
Appraisal
An independent opinion of value ordered by the lender to confirm the house is worth what you agreed to pay. If it comes in below the price you renegotiate, bring the difference in cash, or use your appraisal contingency to walk.
APR
The rate with lender costs folded in, so it is usually a little above the note rate. Useful for comparing two offers, misleading if you plan to move or refinance in a few years, because it assumes you keep the loan the whole term.
Bridge loan
A short-term loan against the house you are selling, used to fund the purchase of the next one before the first sale closes. Paid off from the sale proceeds. Useful, but priced for the risk.
Closing Disclosure
The final accounting of your loan and cash to close. By law you get it at least three business days before closing — use them. Compare it line by line against the Loan Estimate you were given and ask about anything that moved.
Conforming loan limit
The largest loan Fannie Mae and Freddie Mac will buy, set each year by FHFA and higher in some high-cost counties. Above it, the loan is a jumbo and the rules get stricter.
Contingency
A condition that lets you exit with your earnest money: inspection, financing, appraisal. Waiving one makes your offer stronger and your position weaker, which is the entire trade.
Debt-to-income ratio (DTI)
Your monthly debt payments, including the new mortgage, over your gross monthly income. It is the number that most often decides how much you can borrow — which is why a new car payment can cost you a house.
Delayed financing
A conventional cash-out refinance taken soon after buying a house for cash, letting you pull money back out without waiting the usual seasoning period. The source of the original cash has to be documented.
DSCR loan
An investment-property loan qualified on the debt service coverage ratio — the rent divided by the payment — rather than on your personal income.
Earnest money
A deposit that shows you are serious, held in escrow and credited to you at closing. You get it back if you exit through a contingency; you can lose it if you simply walk away.
Escrow
Two meanings. During the deal it is the neutral party holding funds. After closing it is the account your lender uses to collect taxes and insurance with your payment and pay them when due — which is why your payment changes when they do.
HELOC
A home equity line of credit: a revolving line secured by a house you own. Move-up buyers use one on their current home to fund the next down payment, which means opening it before the house is listed.
Loan Estimate
A standardised three-page quote you get within three business days of applying. It is designed to be compared side by side with another lender’s. Get more than one.
Millage
How Michigan expresses a property tax rate: one mill is $1 per $1,000 of taxable value. Rates are set locally, so two houses a mile apart in different townships can carry noticeably different bills.
Mortgage insurance (PMI / MIP)
Insurance that protects the lender, not you, charged when you put down less than 20%. On conventional loans it comes off once you have enough equity. On most FHA loans it stays for the life of the loan, which is the main reason people refinance out of FHA.
Points
Money paid upfront to lower the rate. One point is 1% of the loan. Worth it only if you keep the loan long enough to recover the cost — ask for the break-even in months, not the rate.
Principal Residence Exemption (PRE)
Michigan’s homestead exemption, removing up to 18 mills of school operating tax from your primary home. Filed with the local assessor on Form 2368, with fixed deadlines during the year.
Rate lock
The lender holding your rate for a set window, typically 30 to 60 days. If your closing slips past it, extending usually costs money — a reason to keep the closing date realistic.
Rent-back (occupancy agreement)
An agreement letting the seller stay in the house for a period after closing, usually for a daily rate and a held-back deposit. The tool that lets a seller sell first without moving twice.
Sale contingency
A condition making your purchase depend on your current house selling. It protects you from owning two houses and weakens your offer by the same amount.
State equalized value (SEV) and taxable value
SEV is roughly half of market value. Taxable value is what you are actually taxed on, and it is held below SEV by Proposal A’s cap until the house sells — at which point it uncaps to SEV. The gap between the two is the tax increase waiting for you.
Temporary buydown
Money, often from a builder or seller, that lowers your rate for the first one to three years. The note rate — and the full payment — arrives afterward, so qualify on that.
Title insurance
Protects against defects in ownership history — unreleased liens, forged deeds, missed heirs. The owner’s policy is the one that protects you rather than the lender, and in Michigan it is customarily paid by the seller.
Underwriting
The lender verifying everything you claimed. It is where the requests for one more bank statement come from. Answering fast is the single biggest thing you control about how long closing takes.
VA entitlement
The amount the VA guarantees on your behalf. It restores when a VA loan is paid off, and remaining entitlement can back a second VA loan while you keep the first house.
Ready for a number you can act on? Pre-qualifying takes a few minutes and puts no obligation on you — start above, book fifteen minutes to go straight to a full pre-approval, or reach me at ryanrybarczyk@outlook.com. When you are ready to look, the Michigan listing search is here.