What to know about buying a house in Michigan

As a Michigan first-time home buyer, you can access free advice, counseling, and some special mortgage programs.

Better yet, you may be able to get cash assistance to bridge the gap between your savings and your down payment and closing costs needs.

Here’s how to get started.

Verify your home buying eligibility in Michigan. Start here (Oct 13th, 2021)

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Michigan home buyer overview

The average home sale price across Michigan in July 2021 reached $245,439, according to Michigan Realtors. That was an 11.79% increase over the same month in 2020.

Although some other states have seen faster home price growth, such a large hike can pose problems for Michigan first-time home buyers. It’s hard enough to save for a down payment even when prices are stable.

So read on to discover cash help that might top up your savings.

Michigan Home Buyer Overview
Average Home Sale Price in MI $245,440
Minimum Down Payment in MI (3%) $7,360
20% Down Payment in MI $49,090
Average Credit Score in MI1 714
Maximum MI Home Buyer Grant2 Up to $14,000 loan forgivable after 5 years (Warren only)

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

Verify your home buying eligibility in Michigan. Start here (Oct 13th, 2021)

First-time home buyer loans in Michigan

If you’re a first-time home buyer in Michigan with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

  • Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
  • FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re typically on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
  • VA loan — Only for veterans, active military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
  • USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
  • MSHDA loan — May include competitive interest rates and can be used with down payment assistance. More information below

Note that most of these programs require you to buy a primary residence. That’s a home you’ll live in full-time, not a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

Find the best first-time home buyer loan for you (Oct 13th, 2021)

Michigan first-time home buyer programs

The Michigan State Housing Development Authority (MSHDA) offers two mortgage programs:

  1. MI Home Loan — Minimum credit score of 640. Or 660 for multiple-section manufactured homes
  2. MI Home Loan Flex — Minimum credit score of 660. But in other ways it may be easier to qualify for one of these

Both loan options offer down payment assistance, and either one can be suitable for a Michigan first-time home buyer.

To qualify, you’ll have to meet basic lending criteria as well as a few special rules set by the MSHDA:

You may also be eligible for a mortgage credit certificate (MCC) that can provide savings on your federal taxes, perhaps for the lifetime of your loan.

Michigan first-time home buyer grants

The MSHDA offers down payment assistance loans rather than grants. But these charge 0% interest and require no monthly payments. You simply pay back the amount you borrowed when you sell the home, refinance, transfer, or finally pay off your mortgage in full.

You can borrow $7,500 under these programs everywhere in Michigan. And that’s more than the average 3% down payment in the state.

And if you’re lucky enough to be buying in one of 236 ZIP codes and are using an MI Home Loan, you may be able to borrow up to $10,000.

There are loads of other down payment assistance programs operating in the Wolverine state. And your city or county may well provide one.

So check out the list below and search for “[your city or county] down payment assistance” online. You need to work out which offers the help that suits you best regardless of whether it’s a state or local program.

Verify your home buying eligibility in Michigan. Start here (Oct 13th, 2021)

Buying a home in Michigan’s major cities

There’s good and bad news for those wishing to buy in Detroit. First, home prices are extraordinarily low by national standards for a major city. But, secondly, those prices rose over the last year by an eyewatering amount: 33.2% between August 2020 and 2021.

The only one of the three biggest cities in Michigan that had home prices above the statewide average was Grand Rapids. Warren came between the two others and had the lowest home price inflation: just 6.3% over that August-August period.

Detroit first-time home buyers

The median list price in Detroit was $79,900 in August 2021, according to Realtor.com. That was up 33.2% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $2,400 for 3% down payment
  • $15,980 for 20% down payment

As far as home buyer assistance, Detroit City lists “Potential Incentives Available to New or Current Homeowners in Detroit.”

That includes the Detroit Home Mortgage. Its website says it allows “qualified borrowers can get a mortgage for up to $75,000 above the appraised value of a home to buy a move-in-ready home.”

However, you still need an “adequate” down payment (whatever that means; perhaps 3%). And the down payment assistance on offer seems only to cover certain closing costs and varies by lender. You’ll also need a credit score of 640 or better.

Also, look into the National Faith down payment assistance program for Wayne County. It says it “provides a fixed $7,500 loan for existing houses. This loan is forgivable after five (5) years at 0% interest.”

So, provided you stay in the home for five years and don’t sell the place or refinance, transfer, or pay down the mortgage in that time, you’ll owe nothing on your down payment loan.

Grand Rapids first-time home buyers

The median list price in Grand Rapids was $229,000 in August 2021, according to Realtor.com. That was up 9.6% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $6,870 for 3% down payment
  • $45,800 for 20% down payment

Grand Rapids’ Homebuyer Assistance Fund (HAF) program offers up to $7,500 for low- and moderate-income homebuyers. Buyers can use the money toward the down payment, closing costs, and prepaid expenses. Click the link for conditions.

The website says you have to remain in the home for five years. But it doesn’t spell out what happens when that time’s up. Is the loan forgiven? Or is the debt repayable sometime after that? Call (616) 456-3677 or email [email protected] to find out.

Warren first-time home buyers

The median list price in Warren was $169,900 in August 2021, according to Realtor.com. That was up 6.3% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $5,100 for 3% down payment
  • $33,980 for 20% down payment

The City of Warren Direct Homebuyer Assistance program says, “The City will provide half of the
required down payment and up to $2,500 in closing costs (which includes prepaid taxes and interest) for a
total not to exceed $14,000 per eligible household based on need.”

Provided you’re a responsible homeowner and remain in residence for five years, your whole down payment loan will be forgiven after those five years are up. Click the link for all the conditions.

That’s the best deal we’ve found in Michigan: a loan of up to $14,000 that’s forgiven after five years. It certainly beats the MSHDA’s offer.

Where to find home buying help in Michigan

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Michigan or their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.

Statewide and regional first-time buyer programs in Michigan

You can see a list of Michigan first-time home buyer resources by city and town on HUD’s website.

What are today’s mortgage rates in Michigan?

You can see today’s live mortgage rates in Michigan here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Oct 13th, 2021)

1 Source: Experian.com 2021 study of 2020 data

2Based on a review of the state’s available DPA grants at the time this was written

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