Detroit Mortgage Rates

Living in Detroit

Detroit, known as Motor City because of its historical association with the auto industry, is also the birthplace of the iconic Motown rhythm and blues sound. Home to several popular sports teams (the NHL Red Wings, NFL Lions and MLB Tigers), the city has experienced big booms and major busts, including a bankruptcy filing in 2013.

Detroit was hard-hit by the Great Recession and its bankruptcy, and it is still recovering. The city’s older housing stock and post-Great Recession blight means fixer-upper homes are plentiful and affordable. But first-time buyers can expect competition from one another and from investors. Indeed, Detroit is the top investor market in the U.S., according to CoreLogic.

While the number of home sales hasn’t risen dramatically over the past year in Detroit, home prices are accelerating. Between May 2018 and May 2019, median prices rose 16.88%, from $57,311 to $66,987, according to data from Michigan Realtors. Compared to national home prices (the median hit a high of $285,700 in June, according to the National Association of Realtors), Detroit’s housing market offers an inexpensive entry for first-time or lower-income buyers.

The rules and costs of buying a home in Detroit, Michigan

To help the city recover, a mix of government, nonprofit and corporate partners are collaborating to support homebuyers in Detroit. From detailed seller disclosure laws to special assistance for people buying or facing a foreclosure, the state and city encourage responsible homeownership as a part of community investment. Here’s what you need to know about the laws and taxes governing homebuying and homeownership in Detroit.

Home seller and buyer laws

Homebuyers and sellers in Michigan are not required to work with a lawyer for their home transactions, although they will need to use the services of an escrow or title company. In Michigan, all sellers are required to provide buyers with an extensive property disclosure statement detailing their knowledge of any defects in their home or its surroundings.

In Michigan, foreclosures are typically non-judicial (meaning they aren’t processed through court activity), although judicial foreclosures sometimes do occur. When a home is sold as part of the foreclosure process, it’s possible for the buyer to face a suit for a deficiency judgment — a balance owed representing the difference between the price the home sold for and what it is worth. But homeowners who are struggling to pay their mortgage in Detroit may find help through Michigan’s Step Forward program, which offers supplementary assistance of up to $30,000 for homeowners facing foreclosure due to financial hardship or other issues.

When a couple buys property together in Michigan, they need to be aware that Michigan is an equitable distribution (versus community property) state. This means that, in the event of a divorce, the property will be divided equitably but not necessarily equally, unless that particular split is proven to be equitable.

Taxes

Transfer taxes, which must be paid at recording, cost $1.10 per $1,000 in Wayne County, where Detroit is located, meaning the tax on a $100,000 transaction would be $110. The state also charges transfer taxes of $3.75 per $500 of property value. Your lender will disclose the transfer tax to be paid as part of the borrowing process, and the seller typically pays these taxes.

Several transaction types are exempt from transfer taxes, such as very small property deals below $100 or quit-claim deeds commonly used to add or adjust the names listed on a property’s title. For exemptions, visit the county website.

Wayne County has a median property tax of 2.07% of a home’s assessed fair market value, according to Tax-Rates.org. The county’s rate is one of the highest in the country, and Tax-Rates.org ranks it as 278th out of 3,143 counties. This means residents in the county pay a median of $2,506 per year in property taxes. This is high, even though Detroit home values trend lower than national averages.

But if paying your property taxes is unaffordable for you, Michigan and the City of Detroit offer certain exemptions that may be able to help. Michigan offers a homestead property tax credit for households with income below $50,000 and whose homes are valued at less than $135,000. In addition, Detroit offers a full or partial property tax exemption for homeowners who meet specific income requirements. Seniors, veterans and surviving spouses, and disabled people may be eligible for additional tax relief. You can find out more information about property tax exemptions in Detroit here.

Conforming loan limits

The conforming loan limit in Wayne County is $484,350 for a single-family home. Conforming loans meet terms and conditions that qualify them to be backed by Fannie Mae and Freddie Mac. Limits are set annually by the Federal Housing Finance Agency.

Programs for homebuyers in Detroit

Homebuyers in Detroit can tap the Michigan State Housing Development Authority, city-specific programs that provide down payment or other purchase-related assistance and mortgage tax credits that make buying more accessible.

MI Home Loan

What it provides: Down payment assistance up to $7,500.

Who qualifies: First-time buyers (have not owned a home in the past three years) who buy in qualified areas (including Detroit), satisfy income limits and credit score minimums, and buy a home priced at or below $224,500.

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MI Home Loan Flex Mortgage

What it provides: Down payment assistance up to $7,500.

Who qualifies: First-time or repeat buyers purchasing anywhere in Michigan who satisfy income limits, maintain a minimum credit score of 660 and purchase a home priced at or below $224,500. The program has looser underwriting criteria than traditional loan programs, and borrowers with judgments or collections activity may qualify.

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Mortgage credit certificate

What it provides: Credit for 20% of annual mortgage interest (up to $2,000), paid against year-end tax liabilities, for up to 30 years.

Who qualifies: First-time and repeat buyers in targeted areas within Michigan who satisfy income limits and have purchased a home for $224,500 or less. Borrowers must work with an MSHDA-approved lender.

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Detroit Home Mortgage

What it provides: Down payment assistance and mortgage loans on homes (four-plex or smaller) that are either move-in ready or need improvement and are located within Detroit. Improvement-related mortgages include a primary mortgage loan and second loan for repairs of up to $75,000.

Who qualifies: Buyers shopping for homes within Detroit’s city limits who satisfy borrowing criteria set by five participating banks.

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Detroit Housing Choice Voucher Program

What it provides: Subsidies for lower-income borrowers toward the purchase of a home.

Who qualifies: Lower-income households with an inhabitant who has had at least one year of full-time employment, maintains at least $1,000 in savings, satisfies income requirements, can qualify for a conventional mortgage and meets other criteria. Elderly and disabled residents may also be eligible with waived employment requirements.

Learn more

Rate shopping tips

Getting a favorable interest rate can help you save thousands over the life of your mortgage loan. These are a few tips to consider while shopping.

Contact at least three lenders on the same day

When it comes to getting the best interest rate, the key is comparing rates from multiple lenders. To increase your chances of finding the right lender, be sure to request quotes from at least three lenders so you can make an informed comparison. As interest rates are volatile, contacting the lenders on the same day is key because that is the only way you can make a true comparison. A rate you are quoted one day may no longer be available the next.

Give each lender the same information

By giving all lenders the same information about your finances and the home you hope to purchase, you will help to ensure you get the most accurate information possible about the rate for which you qualify. Again, this makes all the difference in making a true apples-to-apples comparison of your offers.

Add up all the lender fees to confirm costs

When rate shopping, look at all the fees associated with the loan, including origination fees, discount points and other charges. These vary from lender to lender, so look at the APR of each loan, which prices in the interest rate and lender fees. Understanding the true price tag of your purchase can help you avoid sticker shock later on.

Know when to lock in a rate

Locking in a mortgage rate will help ensure it won’t rise along with the market as you go through the homebuying process, which can take a good deal of time. The lock period typically lasts around 30 days, although it can be shorter or longer. You may be able to apply for a rate-lock extension if the deadline passes, sometimes for a fee. If rates go down after you’ve locked yours in, you may be able to get that lower rate through what is known as a float-down option.

The information in this article is accurate as of the date of publishing.