Your Guide to Buying a Home in Michigan

The Michigan Process: A Summary

• In the state of Michigan, real estate transactions can be closed by many people, including an attorney, real estate agent, lending professional, or even a representative from a title company. 
• The buyer and seller often complete the transaction together at the same table. 
• In select situations, an escrow agent can be used to complete the transaction, allowing the buyer and seller to complete the sale separately. (They do not meet at the closing table.)
• Before the purchase contract is final, Michigan homebuyers and sellers need to complete specific details, such as inspections and repairs.
• You’ll need to work with your lending agent to finalize the mortgage contract. 
• The entire state of Michigan is under the base limits for conforming loans, which is currently $647,200 when this was written. 

Your Michigan Home Purchase, Phase 1: Negotiations

Although you and the seller have reached an agreement on sale price, there are still numerous details that need to be worked out…

1. First, you and the seller will sign a purchase contract, committing both of you to the sale. 
2. At the same time, you will pay what is known as “earnest money,” which essentially acts as a show of good faith towards the seller. This money is held in escrow and returned to you when the sale is final. If you back out of the purchase, this money is given to the seller. 
3. The contract is signed and a copy is sent to an attorney or title professional. This person will then begin preparations to have the title transferred. At some point, they will also perform a title check. In the state of Michigan, sellers are required to provide a clear title or supply title insurance once the contract is signed. 
4. You’ll now receive property disclosures from the seller. These are simply statements of known issues with the property, and may include damage, needed repairs, or any other problems with the home. You’ll need to review these disclosures.
5. You can now have inspections performed on the property. These inspections may include a general inspection, which takes a broad look at the entire home. Michigan homebuyers may also want to complete a termite and pest inspection, or septic and well inspections if needed.
6. Depending on the inspections, you can request changes to the purchase contract. If problems are found, you can request a reduction in price or repair of the issue before the sale. The seller will then make a decision to either accept the changes, reject the request, or offer a negotiated settlement. 
7. You can also request a home warranty, which covers the cost of appliance repairs or replacements for a certain period. 

Your Michigan Home Purchase, Phase 2: The Mortgage

You may have been pre-qualified for a loan, but you’ll still need to work with your lending official to complete the details of your mortgage and reach final and official approval.

1. First you will have to formally submit a loan application, either on your own or with professionals assistance. 
2. In roughly three days, you will receive a “good faith estimate” from the lender. This is simply an estimate (that may vary) of the final costs for closing the loan. 
3. Although you have already been pre-qualified, you’ll need to send a variety of documents to your lending agent. These documents will change depending on the loan product and the lending office, but they may include: 

• Pay stubs that demonstrate your weekly or monthly earnings.
• Tax returns to show your past incomes, usually for the past two years.
• Bank statements that show your total savings, expenses, and other earnings.
• Loan documents on current debts, such as student loans and auto loans.
• Any information that impacts your financial situation. This may include divorce decrees, alimony, child support, or legal judgements. Include this information whether it’s negative or positive.
• Explanation on any credit inquiries. Credit inquiries statistically increase your chances for loan default, so you may need to explain any recent inquiries. (During this process, it’s best to avoid new debts.)
• If there are any large deposits outside of your regular income, the lender may need documentation on the source. If the money is a cash gift that will be used towards the downpayment, you may need to supply a gift letter. 
• Your lender may request repeated or updated information. Don’t be surprised if they ask for documents that seem repetitive, as lending officials need as much information as possible to make the loan.

4. Eventually, the lender will make a decision. Assuming you are approved, they will issue an approval letter, which simply states their willingness to support your purchase. You should give a copy of this letter to the seller or seller’s agent.

5. An appraisal will eventually be ordered. This is to confirm the value of the property; it’s a requirement for almost all loans. If the appraisal on the Michigan property comes back low, you’ll have to make adjustments to the purchase or the loan. This could include a reduction in price or a larger downpayment.

6. As some point in this process, you’ll need to order homeowners insurance. Proof of this insurance should be given to the lending office. 

Phase 2 is the longest, and usually takes the most effort on your part. Work with your lender and do your best to supply all requested documents as soon as possible. Also, avoid changes to your income or debt load, as this could disrupt your final approval. 

With patience and diligence, the process will be complete and you can move to the final closing!

Your Michigan Home Purchase, Phase 3: The Closing

Now it’s time to finally close the Michigan home purchase. You’ll meet with the seller, as well as the real estate agent or attorney, and finalize the purchase at the “closing table.” But first, there are a few loose ends that need attending…

1. The attorney or lending professional will calculate the final closing costs, which you’ll need to bring in the form of a cashier’s check. 
2. You and your real estate agent will complete a final walkthrough. This is to ensure the property is still in good condition, as it was when last seen. 
3. You’ll now meet at the closing table to sign all documents, including final loan documents. 
4. You’ll pay the remaining funds for your downpayment to the attorney or whichever professional is overseeing the transaction.
5. The transaction will be recorded with the appropriate city or county. 
6. Unless possession of the property is delayed in the contract, you can get the keys and move into your new Michigan property!

Michigan Conforming Loan Limits

The limits for conforming loans are set by the Federal Housing Finance Agency (FHFA), and these limits are used by numerous programs, including FHA loans, VA loans, USDA loans, and even loans supported by Fannie Mae and Freddie Mac. 

Most of the country is under the base limits, but certain high-priced areas may have larger limits. However, the entire state of Michigan is under the base limits, which is currently $647,200 for a single-family home.

Conforming loans can also be used to buy multi-unit properties in the state of Michigan. The limit for a two-unit property is $828,700, while the limit for a three-unit is $1,001,650. If you want to purchase a four-unit property in Michigan with a conforming loan, the loan limit is $1,244,850. 

These conforming limits apply to the entire state, from Monroe County in the far southeast to Berrien County, which borders Indiana and Lake Michigan. The limits apply to all areas of the Upper Peninsula, including Chippewa County at the tip of the UP, and Gogebic County, which touches Wisconsin and Lake Superior. These limits apply from urban Detroit to the most rural areas of northern Michigan.

The limits, however, only apply to conforming loans. If you need a larger loan, talk to our staff about Michigan jumbo mortgages. 

Note: These limits were current when this article was written, but may have changed. Talk with a lending professional for current and up-to-date conforming limits in Michigan.  

Downpayment Assistance for Michigan Homebuyers

The downpayment represents the largest hurdle for buyers across the country. For perspective, if you are purchasing a home valued at $400,0000, a 5% downpayment would be $20,000.

Fortunately, there are government and non-profit organizations that help people overcome the downpayment barrier.

Here are a few downpayment assistance programs (DPA programs) available to Michigan homebuyers…

State Programs for Michigan Buyers

The largest statewide organization for downpayment support is the Michigan State Housing Development Authority, which offers a DPA program that is available to eligible buyers in all Michigan cities and counties.

MI Home Loan
The MI Home Loan program is a mortgage product that’s offered to first-time homebuyers in the state of Michigan. Through this program, aspiring homeowners can take advantage of two different options:

1. MI DPA Loan: This program offers up to $7,500 in overall assistance.
2. MI 10K DPA Loan: As the name suggests, buyers using this program can get up to $10,000 in support.

One of the top benefits of this program is its broad availability. Many programs have tight income restrictions, but this program welcomes buyers with household incomes approaching $117,000 in certain situations. At a minimum, this program is available to buyers with incomes as high as $89,000.

Local DPA Programs in Michigan

Grand Rapids Homebuyer Assistance Fund (HAF)
The city of Grand Rapids, Michigan offers the Homebuyer Assistance Fund, which provides up to $7,500 in support for low- and moderate-income purchasers. The money provided by HAF can be used for a variety of purposes, including downpayments, closing costs, or other expenses.

Lansing DPA Program
The capital of Michigan offers homebuyers a downpayment assistance program that delivers some of the largest support in the state. Qualifying buyers can get up to $14,999 in assistance, a sizable amount that can significantly lower the downpayment hurdle.

Michigan Downpayment Assistance: Common Requirements

Different programs will have different requirements and restrictions. The most common is an income restriction. Because these programs are intended for low-income buyers (as well as middle-income buyers) you may need to be at or below the area’s typical salary.

You may also need to provide some funding of your own. For example, the Lansing downpayment requirement is only available to buyers who contribute at least $1,000 of personal cash.

Other requirements include a minimum credit score (usually 640 or 620) or a limit on personal assets. Many programs cap the total purchase amount. The MI Home program, as an example, limits purchases to $224,500 or less.

For more information on the top downpayment programs in your area, contact our team right away!