Last Updated on June 3, 2017 by Andrew Lee
People who love the great outdoors call Michigan a home, what with half of the state featuring forests teeming with wildlife. It’s also popular for its craft breweries, which attract both tourists and residents alike. These, plus the fact that many of cities have a cost of living more affordable than many other across the United States, draw new home buyers. To name a few of its best areas are Ann Harbor, Traverse City, and Grand Rapids. (Source: Livability.com)
Considerations Every Home Buyer Should Make
Because home ownership is a long-term decision that involves a huge amount of money, buyers should always explore all their options first, before they apply for financing. Most important considerations to make include the following:
- Current and future housing needs (weighing the pros and cons of home ownership and renting)
- Length of time one intends to stay in the house he/she will purchase
- Financial capability to make the monthly mortgage payments
- Amount of down payment one can make
It’s important for all home buyers to carefully consider these since their individual answers will help them determine which specific type of housing loan to get.
Affordability of Home Lending
Historically, The Great Lakes State had mortgage rate averages lower than that of the U. S. averages. For instance, in 2014, rates averaged at 4.10%, compared with the national average of 4.13%. Then in 2015, the state saw a drop in rates, bringing the average down to 3.86%, while the countrywide average was at 3.88%. This trend continues for 2017.
Home Pricing in the State
Aside of having an average mortgage rate lower than the national average, real estate in MI is also cheaper than many of the other states. On average, a house here fetches a value of $130,400, as opposed to the countrywide median property value of $195,300. A breakdown of housing types as well as their average values are as follow:
- Single-family homes: $105,899.73, housing market share of 90.50%
- Condominiums: $118,693.84, housing market share of 8.90%
- PUD homes: $159,911.76, housing market share of 0.50%
- Townhomes: $131,519.74, housing market share of 0.10%
The Key Differences between Fixed-Rate Mortgages and Adjustable-Rate Mortgages
In this state, borrowers have two main choices when it comes to mortgages: a fixed-rate and an adjustable-rate (also called variable-rate) mortgage. Consumers should first have an understanding of their differences before deciding on which one to get, seeing that their choice will largely influence their overall housing loan expenditures.
The following are the key differences between the two:
- Interest Rate: ARM interest rates are initially lower than those of the fixed-rate loans, but they typically become higher after the teaser rate period. After one, three, or five years, it can already go up, and considerably at that. Fixed-rate mortgages, on the other hand, have locked-in rates, which means that borrowers won’t have to worry about sudden hikes on their monthly payments.
- Interest Rate Averages: Variable-rate mortgages in the state have an average interest rate of 3%, while 30-year fixed-rate mortgages are at 4.21%.
- Monthly Payments: Home owners with an ARM cannot accurately predict how much their next monthly payment is, since their interest rate can go up or down, depending on market performance. Fixed-rate mortgage borrowers have the luxury to do so, since they know exactly how much their interest rate is.
Where to Get Mortgage Assistance
Michigan home buyers and borrowers can seek assistance with mortgage-related concerns from various agencies in the state. For instance, qualifying first-time home buyers can receive down payment assistance from the Michigan State Housing Development Authority (MSHDA), through a program called the MI First Home. MSHDA’s MI Next Home program also offers repeat buyers with down payment financial aid.
Michigan State Housing Development Authority: http://www.michigan.gov/mshda/0,4641,7-141-45866_45868-370762–,00.html, http://michiganida.com/
Michigan Homeowner Assistance Nonprofit Housing Corporation: https://www.stepforwardmichigan.org/