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First-Time Home Buyer in Michigan? What You Need to Know About Closing Costs

Posted on: October 15, 2020

Tips From Our Michigan Bank

familyPart of buying a house includes the costs to process the transaction, and many of these expenses aren't negotiable. If you're a first-time homebuyer in Michigan, it's vital to understand closing costs so you can budget for and save the additional funds.

When you partner with a bank in Ann Arbor, Grand Rapids, or Detroit to finance your home, you’ll receive a loan estimate that includes 3 sections of closing costs:


  • Lender and property related fees - Your lender may show them as specific categories such as origination fees, appraisal fees, credit check, flood certification (if needed), administrative and processing fees, and underwriting fees. Lender fees can also include discount points, which allow you to pay cash upfront to lower your mortgage interest rate.
  • Title company fees - The title company will make sure your Michigan house has a clear title, one with no challenges to your legal ownership. The title company will charge you for a title search, title insurance, and settlement services. Settlement services include tasks like paying off a prior mortgage, depositing loan funds, and coordinating property inspections.
  • Prepaid costs - These include expenses like homeowner's insurance and property taxes. The lender requires prepayment of these fees to ensure your property is protected and in compliance with local municipal tax laws. You'll need to set aside funds to pay for 12 months of homeowner insurance and close to 12 months of property taxes.

Here’s a detailed explanation of each type of closing cost.

Managing and Negotiating Closing Costs

realstateYour closing costs will tie to the value of your home purchase and your lender’s fee structure. The average total for closing costs in the U.S. is $4,876, however homebuyers should expect to pay 2-5% of their home’s purchase price. For example, if your new home price is $200,000, you can plan on spending somewhere between $4,000 - $10,000 in closing costs.

If a friend who recently bought a house tells you, ‘The seller paid all of my closing costs,’ they may be exaggerating a little. While you can negotiate with sellers to cover some additional expenses, other costs like prepaid property taxes or transfer taxes will be your responsibility.

Often, negotiating away closing costs means you agree to pay the seller more for the house. If the purchase price is $150,000 and closing costs are $3,000, you can avoid the extra fees by offering the seller $153,000. You fold the closing expense into the value of your mortgage and avoid paying the initial out-of-pocket costs.

You can also ask your Michigan bank to finance your closing costs. With this option, you’ll pay a slightly higher interest rate to pay for the costs over the term of your loan. Some banks, including Michigan’s Level One Bank, may offer first-time buyers low-down payment options or grant programs to help keep costs down.

For more information about mortgage solutions and first-time buyer support from Level One Bank, contact our team. Buying your first home is one of life’s milestones, and we’re here to help.

Owning your own home is one of the best feelings ever. It can’t be described in words. It can't be quantified in money. Homeownership is a feeling that makes the daily grind worth facing. It reassures you that after all the ups and downs, you have a place to go to…. a place that'll never judge you and always invite you with open arms.

— Unknown

Posted in: Your Home, Your Money, Your Life

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