Finding the right home financing is just as important as finding the right home. When finding Michigan home financing options that work for you it’s important to assess your current personal situation. Whether you’re a first time homebuyer or you have equity in your current home you can use toward a home upgrade, there are a plethora of home financing options to choose from. To make your decision it’s important to select an expert lender and loan officer to aid you during your Mid-Michigan home search.

The Mortgage Pre-Approval Process in Michigan

Getting pre-approved for a mortgage is one of the best things you can do prior to starting your Mid-Michigan home search. Pre-approval allows you to set realistic expectations for what price range of homes you can look at without completely breaking the bank. We recommend getting pre-approved for a mortgage before starting your Mid-Michigan home search by following these steps:

1.

Outline your monthly and annual finances.

3.

Start the pre-approval process with your lender by supplying them with your current financial information. 

5.

Get matched with a Berkshire Hathaway HomeServices Tomie Raines Realtor.

2.

Get matched with a trusted Michigan lender to discuss your home financing options.

4.

Get pre-approved for a mortgage therefore setting a realistic home price range to follow.

6. 

Use your mortgage pre-approval rate to aid your Mid-Michigan home search and to secure a home during the negotiation process.

Conventional home financing options are any mortgage options available aside from government-backed loans. These loans are made by private lenders and will typically be what is used to purchase your home in Mid-Michigan. Here are a few conventional home financing options available in Mid-Michigan that you’ll encounter when applying for a mortgage. 

Conventional fixed-rate mortgages

A conventional fixed-rate mortgage is a traditional mortgage loan with a constant interest rate and level that requires equal payments over a set period of time - Typically 30 years. This home financing option is predictable and suited for those with steady incomes.

Adjustable-rate mortgages (ARMS)

Another conventional home financing option is an adjustable-rate mortgage. The interest rate on an adjustable-rate mortgage changes throughout the term to stay current with the present interest rates. ARMs are most popular when rates are relatively high and appear to be dropping and when the difference between the ARM and the fixed-rate is greater than 2 to 3 percent. Different lenders offer variations in the front end of their ARM plans, such as the points you pay or discounted initial rates. 

Federal Government Programs

There are a few other conventional home financing options that are run through the federal government that may be a useful option depending on your situation. They include:

Federal Housing Administration (FHA) insured loans: Lenders offer FHA mortgages on a new or existing single-family home for as little as 3 percent down. FHA mortgages are also assumable. Sometimes a premium is required when the mortgage is assumed, then refunded when the note is paid off. Down payments are usually low.

Veterans Administration (VA) guaranteed loans: The Veterans Administration guarantees lenders against loss if a property is foreclosed due to default. These assumable loans are available to eligible veterans and may be used to buy, refinance, construct or repair a house. If the VA property appraisal is less than the sale price, the borrower pays the difference as a down payment.

Farmers Home Administration (fmHA) loans: The government makes these loans available to persons of moderate to very low income in rural or non-metropolitan areas.

If your situation does not fall under the convention home financing option umbrella, there are a few alternative financing options to consider. Many Mid-Michigan home buyers may be considering a second mortgage after purchasing a cottage on the lake for example. Here are a few alternative home financing options available in Mid-Michigan that you should consider during your home search.

Lease & Purchase Agreements

Borrowers can lock in the price of a house today and postpone financing for 12 to 18 months with these agreements. The borrower gives the seller a deposit which is applied to the purchase and makes monthly rental payments. Lease/purchase agreements are used by sellers who want to keep a home occupied and receive rental money after they've moved out, and by buyers who are not in a position to commit to a property at a particular time.

Installment Contract

Another alternative home financing option is an installment contract. Buyers and sellers work out a contract which states a down payment, interest rate and term. Some contracts have long terms; others are short-term with balloon payments. Regulations about title transfer in a contract sale vary from state to state.

First mortgages from relatives or others

Sometimes relatives or private investors will purchase a home outright then offer a borrower a first mortgage. The terms are worked out to the mutual satisfaction of both parties. Note: The Internal Revenue Service will impute higher rates on the lender for loans arranged below market rates.

Second mortgages

These are used when a borrower needs additional financing to buy a home. This mortgage may be financed by the seller, another lender, relative or investor, and terms are negotiated between buyer and lender. Often, second mortgages are used when a borrower assumes a guaranteed first mortgage with a lower interest rate and needs to make up the difference between the loan and the sale price.

Equity financing

An equity plan is a home financing option that allows buyers to buy new homes by borrowing against a portion of the equity in their present home. A six-month "bridge" is secured on which no monthly payments are required and that money is used to purchase the new home. When the present home sells, the loan is paid off with the proceeds of the sale. If the home doesn't sell within six months, the owner may renew the loan or choose from other "backup" options.
 

MSHDA Down Payment Assistance

When a home buyer in Michigan buys their homes through the MI home Loan or MI home loan flex programs, MSHDA offers down payment assistance. This program offers up to $7,500, or 4% of the purchase price in down payment assistance, whichever is less, when the home buyer comes up with 1% of the loan amount on their own. This down payment assistance can be used toward closing costs, prepaid expenses and the down payment cost. Once the home is sold, the mortgage is refinanced or the home loan is paid off in full the homeowner must repay the assistance provided. The assistance loan comes with a 0% interest rate.

MI Home Loan

This 30-year fixed rate home loan is offered to first time home buyers with low incomes with a minimum credit score of 640. In order to qualify for this loan, all adults that plan to live in the home must apply and meet the qualifications of the loan set by the State of Michigan. 

MI Home Loan Flex

This home loan is offered to both first time home buyers and repeat home buyers in Michigan. Unlike the Mi Home Loan, it doesn’t require all adults who plan to live in the home to apply for the loan, however, those who apply must have a credit score of 660 or above and must use the loan for an existing home not a manufactured property. 

Michigan Mortgage Credit Certificate

This Michigan certificate program targets first time home buyers and issues a federal tax credit of 20% of the annual mortgage interest paid. There are a few restrictions based on the size of the household and location. This Michigan credit certificate was created to facilitate repeat home purchases throughout Michigan. 
 

Loan Officer Selection

At Berkshire Hathaway HomeServices Tomie Raines Realtors we work closely with Dart Bank and their Home Loan Center located in Mason, Michigan. We recommend scheduling a consultation with Joe Joseph at Dart Bank to get a realistic idea about the home financing options that best suit your needs and what your budget should be during your Mid-Michigan home search. Email him directly at jjoseph@dartbank.com.

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