The housing market in Michigan has been strong in almost all areas of the state. For example, the Holland Sentinel—citing data from the Michigan Regional Information Center and Michigan Realtors—simultaneously reported major demand and drops in inventory throughout the state’s western counties, particularly of lower-priced homes.
Mortgage Rates in Michigan
This caused a major spike in prices. Elsewhere in the state, such as the greater Detroit metropolitan area, part of the market’s strength comes from new buyers taking advantage of a resurgent economy, according to The Detroit News, though it’s unclear if that pace is sustainable.
Michigan’s median home price is still notably low despite price increases, currently at about $147,000, which is fairly below the U.S. median of approximately $320,000, as well as the most common prices in the Midwest, where about 50 percent of homes sell for between $300,000 and $499,999, per data from the U.S. Census Bureau.
At the same time, increased home loan interest rates throughout the country, including Michigan, have played a role in the decrease of mortgage originations—according to Michigan Radio—with some parts of Michigan seeing loan origination decreases greater than 25 percent.
The state may thus become a buyer’s market in the not-too-distant future, even with the continued low inventory, but the clashing of these trends makes it difficult to definitively predict the future of the housing market in Michigan.
Prospective Michigan homebuyers must keep such locally-relevant concerns in mind in addition to the larger economic factors that affect interest rates in all regions.
5 Critical Elements That Affect Mortgage Rates and Refinance Rates in Michigan
The difference between diving headlong into the steps of the home buying or refinancing without taking the time for due diligence can be a margin of thousands (and in some cases millions) of dollars. When looking at a first-time purchase or refinance mortgage rates, Michigan buyers should expect the following major factors to affect the rates they receive:
Credit score
Numerous lenders, no matter where they’re located, will consider this the most important financial characteristic of a would-be borrower. Neither the FICO score, VantageScore, TransUnion model or any of their variants are fail-safe measurements of a borrower’s financial status.
For instance, someone with a well-paying, steady job might have one negative mark on their credit report from an irresponsibly accrued debt in the past, bringing down their score. That said, these measurements give lenders enough solid information to have become a standard tool in borrower evaluation.
Based on data from the Consumer Financial Protection Bureau, scores in those ranges would glean borrowers’ interest rates of about 5.7 percent.
Market value and closing costs
Purchasing a higher-priced home will require a higher loan amount, which will, in turn, lead to a higher interest rate, as the lender of such a large sum will want to protect its investment. Conversely, as the CFPB notes, a large initial down payment of more than 20 percent will by decreasing the amount borrowed and, thus, the lender’s risk.
The value of the home will come into play again during the mortgage refinance process, this time in the form of an appraisal to determine if the value of the home has risen, fallen, or remained about the same since the original mortgage was taken out.
Loan type and term
Fixed-rate mortgages will have higher interest rates attached to them than adjustable-rate mortgages, at least at first. The latter has a fixed rate for the first 3, 5, 7, or 10 years of its term, and then changes once each year based on a benchmark rate chosen by the lender (usually the London Interbank Offered Rate, or LIBOR).
As such the rate may be notably higher or lower based on the fluctuations of the lending institution’s standard rate of choice.
Meanwhile, loans with longer terms, either fixed-rate 30-year mortgages or longer-term adjustable-rate mortgages will almost always have higher percentages than fixed- or variable-percentage home loans with shorter terms, as a trade-off of sorts, given that the monthly payments will be lower.
Location
Some argue that this factor influences mortgage and refinancing rates as much as the loan amount and term, as it has a noteworthy effect on both of those financial metrics.
All aspects of location (the age and size of the neighborhood, the location of the home within that neighborhood, and its proximity to other houses, local businesses, reputable schools, emergency services, etc.) have a part to play in a home’s desirability.
As a result, they also play a role in the annual percentage rate offered to a borrower. For an area like the Detroit metro, its slow but steady revitalization over the past several years has been a pivotal contributor to the strength of its housing market.
Local home inventory
In housing markets where construction is robust, sales are similarly strong, and prices and interest rates generally even out, the market is amenable to both sellers and buyers.
When new homes aren’t being built at their ordinary rate in a given area and there’s still high demand to live there, sellers can drive up prices, thus requiring homebuyers to take out jumbo loans or mortgages with longer terms, both of which generally have higher interest rates than other mortgage types.
The Detroit News pointed out in 2017 that this very issue was significantly affecting the Michigan housing market, and had been impacting it to some extent for almost 10 years; as yet, there are few indications of this trend changing.
How to Get the Best Mortgage and Refinancing Rates in Michigan
There’s no better way to get the best price on any product, including mortgages, than researching as many different offers as possible. According to the CFPB, people don’t do this as often as they should with a mortgage and refinance rates, and house hunters in Michigan would do well not to repeat that mistake.
The internet is arguably a homebuyer’s most valuable research tool, but also take the time to get input from friends or family members who have recently closed on a home or have moved a lot, as well as financial advisors unaffiliated with any of the lenders you’re considering.
Consider different loan types as well as different lenders, taking into account factors like how long you see yourself living in a particular house. Families settling down will likely be best served by longer-term mortgages like 15- or 30-year fixed-rate loans, while those who can see themselves moving after a few years may benefit from an adjustable-rate mortgage.
Meanwhile, those looking to refinance will find that mortgage rates vary from one state to another.
Recommended Mortgage Lenders in Michigan
J.G. Wentworth
This lender offers all major mortgage types at rates close to the U.S. average of 4.95 percent (and lower for those with credit scores of 700 or higher). Also, J.G. Wentworth provides refinancing options backed by the federal HARP program, and its loans include no fees.
Better Mortgage
Though fees are included, rates for a 30-year fixed-rate loan in Michigan through Better Mortgage are lower than the national average (at about 4.75 percent).
Rocket Mortgage
Rocket Mortgage allows potential homebuyers in Michigan to quickly get a personalized quote based on their borrowing criteria and lock it in for 90 days, offering simultaneous flexibility and stability while consumers peruse the market.
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