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Compare mortgage rates in Michigan.
Key Points
• While Michigan mortgage rates have risen in recent years, they remain below historical highs.
• The cost of living in Michigan is 8.5% lower than the national average, and the average home value is $248,000 — considerably lower than the national average of $361,000.
• Factors affecting mortgage rates in Michigan include economic indicators (inflation, unemployment rates, Federal Reserve actions) and consumer factors (credit scores, down payments).
• Michigan offers the full range of mortgage types, such as fixed-rate or adjustable-rate mortgages (ARMs), and FHA, VA, and USDA loans, plus jumbo loans.
• To secure a competitive mortgage rate, homebuyers should compare interest rates and fees, get preapproved, improve their credit score, aim for a larger down payment, apply for preapproval with multiple lenders, and consider discount points.
• Michigan offers first-time homebuyers and low-income families special mortgage resources and programs, including down payment assistance.
Introduction to Mortgage Rates
Mortgage interest rates are not determined by a single institution but rather by a complex interplay of economic indicators and the borrower’s financial profile. The economic factors that impact mortgage rates include the Fed’s interest rate decisions, inflation, and unemployment rates. The borrower’s financial status, on the other hand, encompasses factors such as credit score, down payment, income and assets, and the type of mortgage loan.
This guide aims to provide a thorough overview of mortgage rates in Ohio, including factors that influence them, the types of home loans available, and tips for securing a competitive rate.
Where Do Mortgage Rates Come From?
The Federal Reserve, often referred to as the Fed, plays a pivotal role in shaping mortgage rates. The Fed sets short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates. When the Fed raises short-term interest rates, it becomes more expensive for banks to borrow money. As a result, banks may pass on this increased cost to borrowers by raising mortgage rates. Conversely, when the Fed lowers interest rates, mortgage rates tend to decrease, making it more affordable for individuals to borrow money for home purchases.
From there, a number of macro- and microeconomic influences nudge mortgage rates further up or down. The most important factors are the ones that homebuyers control: their financial profile and the type of mortgage loan they choose.
How Interest Rates Affect Home Affordability
Mortgage rates have a significant impact on the affordability of homeownership. Even small changes in interest rates can make a substantial difference in monthly mortgage payments and the overall cost of buying a home. For instance, a one percentage point increase in interest rate on a $300,000 mortgage adds $68,000 to the total interest paid over the life of the loan. That’s $68K that isn’t going toward emergency savings, a child’s 529 account, or your 401(k).
This underscores the importance of carefully considering interest rates when making homeownership decisions.
Should Homebuyers Wait for Interest Rates to Drop?
If you’re buying your first home, you may be faced with the dilemma of whether to purchase a home immediately or wait for interest rates to drop. While it is tempting to wait for lower rates, there is no guarantee that rates will decrease in the future. Additionally, waiting may mean missing out on opportunities to build equity and take advantage of favorable market conditions.
Homeowners who are concerned about their current home loan interest rate can always consider a future mortgage refinance when rates drop. Refinancing allows homeowners to obtain a new mortgage with a lower interest rate, potentially reducing their monthly payments and saving money over the life of the loan.
Michigan Mortgage Rate Trends
Examining historical mortgage rate trends can offer valuable insights into where rates are headed. While Michigan mortgage rates have risen in recent years, they remain below historical highs. In fact, current rates are hovering around the 50-year average.
By understanding historical trends, Michigan homebuyers can gain perspective on the current mortgage rate environment and make informed decisions about purchasing a home. (Note that the FHFA stopped reporting state rates after 2018.)
| Year | Utah Rate | U.S. Rate |
|---|---|---|
| 2000 | 8.04 | 8.14 |
| 2001 | 6.99 | 7.03 |
| 2002 | 6.41 | 6.62 |
| 2003 | 5.54 | 5.83 |
| 2004 | 5.63 | 5.95 |
| 2005 | 5.84 | 6.00 |
| 2006 | 6.67 | 6.60 |
| 2007 | 6.66 | 6.44 |
| 2008 | 6.21 | 6.09 |
| 2009 | 5.19 | 5.06 |
| 2010 | 5.05 | 4.84 |
| 2011 | 4.51 | 4.66 |
| 2012 | 3.60 | 3.74 |
| 2013 | 3.74 | 3.92 |
| 2014 | 4.10 | 4.24 |
| 2015 | 3.86 | 3.91 |
| 2016 | 3.72 | 3.72 |
| 2017 | 4.09 | 4.03 |
| 2018 | 4.69 | 4.57 |
Historical U.S. Mortgage Rates
To provide further context, here is a brief overview of historical U.S. mortgage rates:
• 1980s: Mortgage rates reach double-digit levels, peaking at over 18.00% in 1981.
• 1990s: Rates decline significantly, reaching lows in the mid-1990s, with an average rate of around 7.00%.
• 2000s: Mortgage rates remain relatively stable, hovering around 6.00% for much of the decade.
• 2010s: Rates hit record lows following the Great Recession, with an average rate of around 4.00%.
• 2020s: Post COVID-19, rates began to rise again, influenced by economic recovery and inflation.
Factors Affecting Mortgage Rates in Michigan
Many different factors influence mortgage rates in Michigan and across the country. These can be separated into two categories: economic and consumer.
Economic factors that affect mortgage rates include the Fed’s interest rate decisions, inflation, and unemployment rates. Consumer factors, on the other hand, encompass elements such as credit score, down payment, income and assets, and the type of mortgage loan.
Economic Factors
• The Fed: The Federal Reserve plays a central role in shaping mortgage rates through its monetary policy decisions. The federal funds rate, which is the interest rate banks charge each other for overnight loans, serves as a benchmark for other interest rates, including mortgage rates. When the Fed raises the federal funds rate, it becomes more expensive for banks to borrow money, leading to higher mortgage rates.
• Inflation: Inflation, which refers to the general increase in prices and fall in the purchasing power of money, can also impact mortgage rates. When inflation rises, the value of money decreases, making it more expensive for lenders to lend money. To compensate for this, lenders may increase interest rates to maintain their profit margins.
• Unemployment rate: The unemployment rate is another economic factor that influences mortgage rates. Low unemployment generally indicates a strong economy, which often leads to increased demand for housing. This increased demand can put upward pressure on home prices and, consequently, mortgage interest rates.
Consumer Factors
• Credit score: A credit score is a numerical representation of an individual’s creditworthiness, based on their credit history. A higher credit score indicates a lower risk of default, making borrowers more attractive to lenders. As a result, individuals with higher credit scores typically qualify for lower mortgage interest rates.
• Down payment: The down payment, which is the upfront payment made by the borrower toward the purchase of a home, also influences mortgage rates. A larger down payment reduces the amount of money that needs to be borrowed, lowering the risk for the lender. Consequently, borrowers who make a larger down payment may be eligible for lower mortgage interest rates.
• Income and assets: Lenders carefully evaluate a borrower’s income and assets when determining mortgage rates. A steady income and sufficient assets provide assurance to lenders that the borrower can repay the loan. Borrowers with a stable income and substantial assets may qualify for lower mortgage interest rates.
• Type of mortgage loan: The type of mortgage loan chosen can also impact the mortgage interest rate. Certain loan types, such as adjustable-rate mortgages (ARMs), often offer lower initial rates compared to fixed-rate mortgages. Additionally, government-backed loans, like VA mortgages, may have lower rates. Plus, a shorter loan term typically comes with a lower interest rate than a longer loan term.
Types of Mortgages Available in Michigan
Homebuyers in Michigan have access to a variety of mortgage types, each with its own characteristics and benefits. These include fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, and USDA loans.
Conventional loans are not backed by the government and have a maximum allowable amount that’s enough to cover most homebuyer purchases. They can be fixed-rate or adjustable-rate. Fixed-rate conventional loans offer a stable interest rate throughout the life of the loan, while adjustable-rate conventional loans have an initial fixed rate that can adjust periodically based on market conditions.
Fixed-Rate Mortgage
Fixed-rate mortgages provide stability and predictability by maintaining the same interest rate for the entire loan term. This means that the monthly principal and interest payments remain constant throughout the life of the loan, making it easier for borrowers to budget and plan their finances.
Fixed-rate mortgages are typically available in terms of 10, 15, 20, or 30 years. The loan term refers to the duration over which the loan is repaid. A shorter loan term, such as 10 or 15 years, may have a higher monthly payment but can result in significant interest savings over the life of the loan. Conversely, a longer loan term, such as 20 or 30 years, may have a lower monthly payment but will accrue more interest over time.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) offer an initial interest rate that is typically lower than fixed-rate mortgages. This can be attractive to borrowers who are looking for a lower initial monthly payment. However, it is important to note that the interest rate on an ARM can adjust periodically, usually after 5 or 7 years, based on market conditions.
ARMs can be beneficial for borrowers who plan to sell their home before the fixed-rate period ends. If the home is sold before the interest rate adjusts, the borrower can take advantage of the lower initial rate without being subject to potential future rate increases.
FHA Loan
FHA loans, insured by the Federal Housing Administration (FHA), are designed to make homeownership more accessible to borrowers who may not meet the strict requirements of conventional loans. FHA loans typically have more lenient eligibility requirements, such as lower credit score and down payment requirements, making them a good option for first-time homebuyers or those with limited financial resources.
The FHA insures these loans, which reduces the risk to lenders and allows them to offer more favorable terms to borrowers. This insurance enables borrowers with less-than-perfect credit or limited savings to obtain a mortgage and purchase a home.
VA Loans
VA loans are offered by the U.S. Department of Veterans Affairs (VA) and are available to eligible veterans, active-duty military members, and certain Reserve and National Guard members. VA loans provide competitive interest rates and do not require a down payment, making them an attractive option for military personnel and veterans. Additionally, VA loans typically have lower closing costs compared to other types of mortgages.
USDA Loans
USDA loans, provided by the U.S. Department of Agriculture (USDA), are designed to assist low-income borrowers in purchasing homes in rural areas. These loans offer competitive interest rates and do not require a down payment, making homeownership more accessible for individuals and families in eligible rural communities.
Jumbo Loans
Conventional mortgage loans have a maximum lending limit set by the Federal Housing Finance Agency (FHFA). For 2024, the conforming loan limit for a single-family home in Michigan is $766,550. Jumbo loans are nonconforming loans that exceed this limit and are typically used to finance more expensive properties.
Popular Places to Get a Mortgage in Michigan
When searching for a mortgage in Michigan, it is important to consider the location of the property you are interested in. The cost of living in Michigan is 8.5% lower than the national average, and the average home value is $248,000 — considerably lower than the national average of $361,000. Still, home prices and mortgage terms can vary significantly from one area to another.
Some popular places to get a mortgage in Michigan include:
• Ann Arbor: Known for its university town atmosphere and strong economy, Ann Arbor offers a diverse range of housing options. The average home value is $509,583.
• Grand Rapids: With a thriving economy and a mix of urban and suburban neighborhoods, Grand Rapids is another popular destination for homebuyers in Michigan. Average home value: $279,000.
• Detroit: Despite facing challenges in the past, Detroit is experiencing a revitalization and offers affordable housing options. Average home value: $75,000.
• Lansing: The state capital of Michigan, Lansing provides a mix of urban and suburban living and has a relatively stable housing market. Average home value: $157,000.
• Kalamazooo: Located in southwestern Michigan, Kalamazoo is known for its educational institutions and offers a variety of housing options. Average home value: $232,000.
Recommended: The Cost of Living in the U.S.
Least Expensive Locations
The average monthly expenses for one person or a family varies widely in Michigan, depending on location. Some of the least expensive locations to get a mortgage in Michigan include:
• Muskegon: Located on the shores of Lake Michigan, Muskegon offers affordable housing options and a lower cost of living compared to other parts of the state. Average home value: $178,000.
• Saginaw: Situated in central Michigan, Saginaw is known for its affordable housing and diverse cultural heritage. Average home value: $122,000.
• Flint: Despite facing economic challenges in the past, Flint offers affordable housing options and has a relatively low cost of living. Average home value: $63,000.
• Port Huron: Located in southeastern Michigan, Port Huron provides access to the St. Clair River and offers affordable housing options. Average home value: $166,000.
• Battle Creek: Known for its cereal industry, Battle Creek has a lower cost of living and offers a variety of housing options. Average home value: $171,000.
For more inexpensive housing options in Michigan, check out our guide to the Best Affordable Places in the U.S.
Most Expensive Locations
Some of the most expensive locations to get a mortgage in Michigan include:
• Birmingham: An affluent suburb of Detroit, Birmingham is known for its luxurious homes and high cost of living. Average home value: $661,000.
• Grosse Pointe: Located along the shores of Lake St. Clair, Grosse Pointe is known for its upscale neighborhoods and high property values. Average home value: $427,000.
• Northville: Situated northwest of Detroit, Northville offers a suburban lifestyle with a higher cost of living. Average home value: $542,000.
• Ann Arbor: While Ann Arbor offers a diverse range of housing options, it also has a higher cost of living due to its strong economy and university presence. Average home value: $510,000.
• East Grand Rapids: Known for its historic homes and proximity to downtown Grand Rapids, East Grand Rapids has a higher cost of living compared to other parts of the city. Average home value: $616,000.
Tips for Securing a Competitive Mortgage Rate in Michigan
Obtaining a competitive mortgage rate can save you thousands of dollars over the life of your loan. Here are some tips to help you secure a competitive mortgage rate in Michigan:
Compare Interest Rates and Fees
It is essential to compare interest rates and fees from multiple lenders to find the best deal. Don’t settle for the first offer you receive. By shopping around, you can potentially save thousands of dollars.
In addition to the interest rate, be sure to ask about any upfront costs or closing fees associated with the loan. These fees can vary from lender to lender and can add to the overall cost of the mortgage.
Get Preapproved
Mortgage preapproval is an important step in the homebuying process. It gives you a better understanding of how much you can afford to borrow and strengthens your position when making an offer on a property. Getting preapproved also allows you to move quickly when you find the right home, as you will already have a lender ready to provide financing.
Just don’t expect a speedy answer: Unlike prequalification, the mortgage preapproval process can take up to 10 days.
If you are concerned about interest rates, you can lock in your rate for a certain period of time, typically ranging from 30 to 90 days. This can provide peace of mind knowing that your interest rate will not increase before you close on the loan.
Michigan Mortgage Resources
Michigan offers a variety of resources and programs to assist homebuyers, particularly those who qualify as a first-time homebuyer and buyers with limited financial resources. These resources include:
First-Time Homebuyer Programs
Michigan offers programs designed to help first-time homebuyers overcome the challenges of purchasing a home. First-time buyers and repeat buyers in targeted areas may claim a federal tax credit equal to 20% of their annual mortgage interest, up to $2,000 a year. Fees apply.
Down Payment Assistance
Down payment assistance programs can help homebuyers who may not have the funds for a traditional down payment. These programs may provide grants, loans, or other forms of assistance to cover a portion of the down payment.
The Michigan Down Payment Program offers no-interest, no-payment loans for $10,000 to cover down payment and closing costs. The loan must be paid back when you sell, refi, or pay off your first mortgage.
Tools & Calculators
Various online tools and calculators are available to help homebuyers estimate their monthly mortgage payments, calculate affordability, and compare different loan options. These tools can be valuable in planning and budgeting for a home purchase.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Michigan: Exploring Your Possibilities
Refinancing a mortgage can be a strategic move for homeowners looking to lower their interest rate, reduce monthly payments, or access cash for other financial needs.
Homeowners with FHA-insured loans may be eligible for the FHA Streamline Refinance program, which allows them to refinance into current mortgage rates with minimal hassle. This program offers simplified underwriting requirements and may not require a new appraisal.
VA loan holders may be eligible for an Interest-Rate Reduction Refinance Loan (IRRRL), which allows them to reduce their monthly payments by adjusting the annual percentage rate (APR) on their existing VA loan. This program offers streamlined refinancing with minimal documentation and may not require a new appraisal.
In addition to these options, conventional refinance loans are also available. Conventional refinance loans are not backed by the government and offer competitive interest rates. However, they may have stricter credit and income requirements compared to FHA and VA refinance loans.
Closing Costs and Fees in Michigan: What to Expect
Closing costs are fees associated with the purchase of a home. In Michigan, buyers can expect to pay between 2% and 5% of the home’s purchase price in closing costs. These costs may include appraisal fees, title insurance, loan origination fees, and other administrative charges.
The specific closing costs associated with a home purchase in Michigan can vary depending on the property value and location. Higher-priced homes and properties in certain areas may have higher closing costs.
The Takeaway
Michigan’s mortgage landscape offers a range of options for homebuyers, from fixed-rate to adjustable-rate mortgages, government-backed loans, and jumbo loans. By staying informed about current mortgage rates, exploring assistance programs,and seeking professional guidance, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in Michigan.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
What is a mortgage rate?
A mortgage rate is the interest rate charged by a lender for borrowing money to purchase a home. It directly impacts the monthly mortgage payments made by homeowners.
Will mortgage rates drop in Michigan?
Predicting the direction of mortgage rates is challenging, and there is no guarantee that they will drop in Michigan. Homebuyers should carefully consider their financial situation and housing needs when deciding whether to wait for lower interest rates or proceed with a purchase at the current rates.
Will mortgage rates ever go back to normal?
The definition of “normal” mortgage rates can vary depending on economic conditions and historical trends. Mortgage rates have fluctuated over time, and there is no guarantee that they will return to any specific level in the future.
Will Michigan home prices ever drop?
Predicting future home price trends is complex and involves diverse economic factors, market conditions, and regional dynamics. While home prices can experience fluctuations, there is no certainty that they will drop in Michigan.
Is it a good time to buy a house in Michigan?
The decision of whether it is a good time to buy a house in Michigan depends on individual circumstances, financial readiness, and housing market conditions. Homebuyers should carefully assess their financial situation, housing needs, and market trends to make informed decisions.
How to lock in a mortgage rate?
Locking in a mortgage rate involves obtaining a commitment from a lender to hold a specific interest rate for a certain period. Homebuyers can lock in a rate by getting preapproved for a mortgage and paying a lock-in fee.
How do mortgage interest rates work?
Mortgage interest rates are determined by various factors, including the overall economy, inflation, and the Federal Reserve’s monetary policy. Lenders consider these factors when setting mortgage rates to ensure they can cover their costs and maintain profitability.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process