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Now that the housing market is finally calming down after the pandemic[1], buyers are facing a new challenge: Soaring mortgage rates.[2]
In Michigan, the average 30-year fixed mortgage rate is 5.59% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,088 (assuming a 20% down payment at the median home value).
But buying a home in Michigan is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Michigan with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $47,447 for the typical home in Michigan — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Michigan want you to contribute 20% of the purchase price as a down payment. That would be $47,447 for a $237,236 home — the typical home value in Michigan.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Mortgage type | Minimum down payment (%) | Down payment ($) |
|---|---|---|
VA Loan | 0% | $0 |
FHA Loan | 3.5% | $8,303 |
Conventional | 3% | $7,117 |
Based on typical home values from Zillow (August 2022) | ||
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Down payment | Monthly payment | Total interest | Total Cost |
|---|---|---|---|
5% | $1,292 | $239,892 | $477,128 |
20% | $1,088 | $202,014 | $439,250 |
Based on home values from Zillow (August 2022) and a 5.59% interest rate for a 30-year loan. | |||
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Michigan down payment assistance programs
If you need some financial assistance, there are plenty of down payment assistance (DPA) programs for first-time and low-income homebuyers in Michigan. Eligible buyers can receive a government grant or a second mortgage to help cover a down payment or closing costs.
Here are just a few DPA programs that you might qualify for:
MI DPA Loan
The Michigan State Housing Development Authority offers the MI DPA Loan, which provides up to $7,500, and the MI 10K DPA Loan, which offers up to $10,000 in certain areas.
To be eligible, you must have a credit score of at least 640 and take a homebuyer education course. The home you buy must not exceed the sales price of $224,500, and your annual earnings can't exceed the local income limits.
MI Home Flex Program
The MI Home Flex Program offers up to $7,500 to first-time and repeat homebuyers in the state. Eligible participants need to have a credit score of at least 660, meet household income requirements, and not earn more than the maximum income limit.
U.S. Department of Housing and Urban Development
You can find a list of additional DPA programs on Michigan's HUD page here.
Step 2: Find a great real estate agent in Michigan
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Michigan.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Michigan will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Michigan home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Michigan is $237,236, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Grand Rapids:
Home value appreciation in Grand Rapids
Neighborhood | 2015 | Current | Appreciation |
|---|---|---|---|
Creston | $46,734 | $94,607 | 50.6% |
Garfield Park | $68,630 | $206,171 | 66.7% |
West Grand | $80,461 | $223,153 | 63.9% |
Step 5: Start house hunting in Michigan
🔑 Key takeaway:
The prices for homes in Michigan are likely to stay within your budget expectations, as listing prices have barely increased over the last year. While that may be the case, inventory hasn't picked up much either, so you may still be limited in terms of options. Be a bit more flexible with your requirements for your new home — your real estate agent can show you some great listings that may not be exactly what you’re looking for, but they still might surprise you.
Searching for homes in Michigan is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Michigan can have a big impact on your number of options. For example, in Michigan, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Michigan. Historically, there are 54.4% fewer homes for sale than during Michigan's peak season.
Housing inventory in Michigan by season
Season | New listings per month |
|---|---|
Spring | 15,822 |
Summer | 15,822 |
Fall | 15,822 |
Winter | 15,822 |
Step 6: Make an offer
🔑 Key takeaway:
Homes are flying off Michigan’s market, so expect a lot of competition when checking out great listings. If you find a house you like, act quickly and try to put in an offer the same day of viewing. Heed your agent’s advice when writing your offer to come up with a competitive figure that won’t blast a hole through your bank account. Remember that while the market is very active, there’s still some room for requesting concessions — but only if you handle negotiations properly.
Once you find a Michigan house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Michigan, homes stay on the market for 64 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Michigan homes sell fastest in June, where the average property is only on the market for 46 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in February, you have a bit more time to search. Homes typically stay on the market 27 days longer than Michigan's annual average.
Average time homes spend on market in Michigan
Annual average | 64 days |
January | 86 days |
February | 84 days |
March | 67 days |
April | 55 days |
May | 48 days |
June | 43 days |
July | 45 days |
August | 48 days |
September | 56 days |
October | 60 days |
November | 67 days |
December | 78 days |
Based on data from Realtor.com (October 2022) | |
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Michigan
Having your Michigan home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Roof
- Foundation
- Electrical system
- HVAC system
- Plumbing
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Michigan-specific inspections
Michigan sellers are required to complete a comprehensive disclosure form about their property, but they might not be aware of all problems with their home. Before closing, homebuyers are encouraged to have specific tests done to rule out any potential safety risks or hazards.
In addition to a general home inspection, consider conducting the following tests to ensure that a home is safe:
- Radon testing: Certain areas of Michigan are likely to have elevated radon levels, so it's highly recommended to conduct a radon test annually. If the seller hasn't done a test recently, you can order a testing kit from your local health department here.
- Termite inspection: Pest inspections are only required in 25 Michigan counties, but completing one is a good idea for all potential homebuyers. Termites and other pests may go unnoticed until they cause significant damage to a property, so it's important to catch possible infestations early.
Appraisals
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
On closing day, you'll meet at the title company to finalize the property transfer of your Michigan home and settle your closing costs.
First, prepare to read and sign a lot of paperwork. If you notice an error or something doesn't make sense, be sure to ask your escrow agent for advice.
There will be several important legal documents to review, including:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
After you finish the paperwork, you’ll have to pay your closing costs. The title company will collect the total amount you owe and disburse the payments to each service provider on your behalf.
Since your closing costs will include the fees you owe to your mortgage lender, expect your costs to be higher than the seller's. If you want to know exactly where your money is going, you can usually divide your closing costs into four categories:
- Title and escrow charges: Fees paid to the title company for the title insurance, title search, and facilitating the closing process.
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. Other costs connected to your loan may also include appraisal fees and survey fees.
- Prepaid costs: Ongoing costs of homeownership. Lenders often require new homeowners to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous fees that differ according to each buyer's situation. Other closing costs can include natural disaster certification fees and real estate attorney fees.
Buyers in Michigan typically pay 3–5% of the purchase price in closing costs. For a $237,200 home — the typical home value in Michigan — that's between $7,116 and $11,860!
Frequently asked questions
In Michigan it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Michigan neighborhoods
- Partner with the right real estate agent in Michigan
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, the MI Home Loan program offers a 30-year, fixed-rate mortgage to eligible buyers. Participants may also apply for up to $10,000 in down payment assistance.
To qualify, you must have a credit score of at least 640 and meet the income limits for your county. Additionally, the purchase price of your home cannot exceed $224,500.
Why trust us?
Clever Real Estate is a free agent-matching service that has helped more than 82,000 people buy and sell homes. We partner with over 2,700 top-performing agents nationwide at national brokers including Keller Williams, RE/MAX, Century 21, and more. We also help buyers save money with cash back after closing — no strings attached.
We’ve earned buyers’ trust with a rating of 4.9 out of 5 stars on Trustpilot and over 1,800 customer reviews.
Our team of industry-leading researchers is committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.