Buying a House in Michigan
If you’re ready to buy a home, Michigan has lots to offer. From the bustling city environments to more peaceful, rural settings, there’s truly something for everyone here.
While buying a house is an exciting event, it can also be overwhelming, especially if you’re purchasing your first home. The hot, highly competitive real estate market also adds new challenges to buying a home that buyers haven’t previously faced. That’s why we’ve created this guide to lead you through the homebuying process in nine simple steps. Read on to learn how to buy a house in Michigan with confidence, no matter what the market brings.
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How to Buy a House in Michigan in 9 Steps
The following steps will help to ensure that you’re prepared for every phase of the homebuying process, from deciding if you’re really ready to buy to closing on your new home. This guide covers all of those must-know elements about buying a home in Michigan, so you’ll feel better prepared throughout the whole process.
Step 1. Evaluate Your Finances
Start by evaluating your finances. Look at your monthly spending and create a budget, if you haven’t already. Consider how much money you have in savings, as well as how much extra you are able to save each month, and think about how much you can realistically spend on a home. Start saving up for your down payment, closing costs, taxes, and other homebuying expenses early on, so you’re ready to make an offer when you find the home that’s right for you.
This is also the time to check up on the different financial elements that a home financing company will use when approving you for a mortgage. Start to gather documents together, including your tax returns, employment history, bank statements for the last three months, and rental history.
Financiers will also check your credit history, and that history can affect not only your chance of getting approved, but also your mortgage rates. Focus on building your credit by making all of your payments on time, using less than 30% of the credit that’s available to you, and avoiding opening any new credit accounts, which will temporarily lower your score.
Evaluating your finances is one of the most important things to do before getting pre-approved for a mortgage, and it can make it easier to apply for pre-approval.
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Step 2. Explore Your Home Financing Options
Start to explore the different home financing options available, so you can decide which is best for your needs. Chances are you’ve heard lots of information about conventional mortgages, but an Islamic mortgage offers an appealing alternative that might be a better choice.
There are some key differences between an Islamic mortgage and a conventional mortgage. While a conventional mortgage functions as a loan from a creditor to a debtor, an Islamic mortgage through a non-bank mortgage financier like Guidance Residential is a co-ownership mortgage. As a co-owner, you and Guidance Residential own shares in the home. You’ll have exclusive rights to use the whole property, and you will gradually buy out Guidance Residential’s shares in the home.
Since riba, or interest, is prohibited by Islamic law, an Islamic mortgage is a type of interest-free home financing. As a co-owner, you won’t pay interest, and late payment fees are also limited to a small fixed fee to cover administrative costs. This arrangement also helps you to avoid many of the hidden risks in conventional and FHA home loans, like if your home were to be destroyed by a disaster like a hurricane or a tornado.
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Step 3. Get Pre-Approved for a Mortgage
As you prepare to shop for a home, it’s important to get pre-approved or pre-qualified. A pre-qualification is the first step in getting financing for your home, and it will help you to better estimate how much house you can afford. Pre-qualification is based on information that you self-report, like your income and debt, but it’s just an estimate.
There are several reasons to get pre-approved for a mortgage, rather than just getting pre-qualified. When you’re pre-approved, a financing company will analyze your finances and give you a specific mortgage amount for your mortgage that is valid for a certain period of time. Getting pre-approved requires a credit check, and you will also need to provide documents like your bank statements and verification of your income.
Getting pre-approved shows that you’re serious about buying a home. Some real estate agents and sellers won’t show a home to any potential buyers who aren’t pre-approved, and a pre-approval letter can increase the chances of a seller accepting your offer. Getting pre-approved can also help you to better understand mortgage rates and determine how much house you can afford, so you can focus your search on the homes that are within your budget.
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Step 4. Find a Real Estate Agent in Michigan
With your pre-approval completed, it’s time to find a real estate agent in Michigan. Your real estate agent will be your partner throughout the process of buying a home. Your agent will help to find and show you homes, guide you through the process of making an offer, negotiate contracts on your behalf, and help you to navigate the closing process.
Since an agent plays such a key role in the process of buying a home, it’s important to find a real estate agent who is the right fit for your needs. Look for an agent who not only has plenty of experience in real estate but who has specific experience working with homes in your price range. Consider the agent’s client reviews, and take the time to read the comments about what others have said about the agent. Contact multiple agents and ask any questions that they have. Only choose an agent whom you are comfortable working with.
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Step 5. Select the Right Location
Michigan is a large state, and the real estate market and requirements vary significantly depending on where in the state you choose to live. As you explore different neighborhoods, consider not only average home prices but also the property taxes and how they will impact your budget.
It’s also important to consider other factors, like whether a location will require you to purchase flood insurance. While a waterfront property may be appealing, you may need to adhere to additional waterfront property law requirements which can restrict how you are able to use the property.
Don’t forget to consider the weather, too. Look at average temperatures, both in the summer and winter, as well as total rain and snowfall to find an area where you will be comfortable living.
What Are the Best Places to Live in Michigan?
There are many highly desirable places to live in Michigan:
- Ann Arbor offers a rich culture that includes art, education, and an active nightlife.
- Grosse Pointe is full of lakefront parks and outdoor spaces, as well as schools, making for a quiet lifestyle suitable for both young families and retirees.
- Alpena is a beach town that offers a laid-back lifestyle, though its popularity with tourists means there are also plenty of activities to do during the summer.
- Grand Rapids features a bustling environment, and there are plenty of attractions including art galleries, theaters, parks, breweries, and more.
- Kalamazoo features a pedestrian mall filled with lots of shopping opportunities, and there are plenty of nature preserves and art attractions, too.
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Step 6. Begin House Hunting in Michigan
With a good real estate agent on your team, you’ll be ready to start house hunting. Compile a list of must-have and nice-to-have features to help guide your search. Consider factors like price, number of bedrooms, and neighborhood and location as you narrow down your options.
House hunting in Michigan is better at certain times of the year. Listing prices tend to be lowest in January, and the housing inventory also reaches its peak in January. Mortgage rates are lowest in December, so focusing your search in the winter months might help you to find a home faster.
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Step 7. Make an Offer (and Get It Accepted)
Once you’ve found a house that you like, it’s time to make an offer. Your real estate agent will help you to determine an appropriate amount to offer, as well as any contingencies you want the offer to include. You will also need to decide how much earnest money you should put down, which demonstrates to the seller that you’re serious about buying the house.
Your agent will help you to prepare an offer letter, and the seller can accept, reject, or make a counteroffer. If the seller makes a counteroffer, your agent can help you to decide if you want to revise your offer and negotiate the deal.
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Step 8. Obtain a Home Inspection and Appraisal
Once your offer is accepted, you will need to plan for a home inspection and appraisal.
Generally, it’s best to start with the home inspection, which can help to identify any significant issues that might prompt you to decide against buying the house. The home inspection includes a thorough look at the home’s interior and interior, as well as aspects like plumbing and electricity. If the inspector finds issues, you can request that the seller fix them before you buy the house, or can potentially use them to negotiate down the purchase price.
If the home inspection doesn’t reveal any issues that would cancel the purchase agreement, then you can schedule a home appraisal. During the appointment, an appraiser will look at factors like the home’s age, condition, neighborhood, and recent sale prices of local homes. The appraiser uses that information to estimate the value of the home. Then, they provide that information to your home financing partner.
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Step 9. Close on Your Michigan Home
Once the appraisal is complete, your financier will review your finances and credit, issue a final approval of your mortgage, and provide you with a closing date. At the closing, you will meet with your lawyer (if applicable) and real estate agent, sign all of the sale documents, pay your down payment and closing costs, and officially purchase your home.
You will need to prepare to pay not only the down payment, but also any closing costs. Typical closing costs include fees like a transfer tax and recording fees. In Michigan, you will pay 4.27% of your home’s price at closing. Other fees include a 0.86% transfer tax, 0.02% recording fees, and lawyer fees. You will also need to be prepared to pay your homeowner’s insurance and any other relevant fees, like property appraisal or homeowners association fees.
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The Bottom Line: Buying a House in Michigan Is Easier with Our Help
If you’re ready to buy a home in Michigan, Guidance Residential can help to make that process easier. Not only can you turn to Guidance Residential for financing, including Islamic mortgages, but thanks to Guidance Home Services, we can help you to find a local real estate agent, too.
Get pre-qualified online in fewer than 10 minutes, and we’ll connect you with a knowledgeable and reliable real estate agent in Michigan to ensure your homebuying experience goes smoothly.