Closing Costs in Michigan: What Homebuyers Need to Know

Closing costs refer to the fees charged to both the buyer and seller to finalise a real estate transaction. These costs typically range from 2-5% of the home’s purchase price for buyers and 6-10% for sellers in Michigan. While closing costs can vary significantly based on factors like location and property type, understanding what goes into them is key for budgeting when buying or selling a home.

Key Takeaways

  • For buyers, closing costs range from 2-5% of the purchase price
  • Sellers pay between 6-10% of the sale price for closing fees
  • Major buyer fees include lender charges, title insurance, transfer taxes
  • Seller closing costs include agent commissions, legal fees, taxes
  • Closing expenses can be reduced through negotiation, shopping lenders, first-time buyer programs

What are Closing Costs in Michigan

Closing costs refer to the various administrative fees charged to both the home buyer and seller in order to finalize the real estate transaction. These costs cover services like document processing, inspections, taxes, legal fees, and more that are required to transfer ownership of the property.

While the seller is customarily responsible for paying the majority of closing costs, the buyer will still have to pay fees associated with obtaining their mortgage loan, inspections, and more. Common closing fees paid by Michigan home buyers include:

  • Lender origination fee – Paid to your lender to process your mortgage application, typically ranging from 0.5% to 1% of the loan amount.
  • Appraisal fee – For the appraisal report to value the home
  • Credit report fee – To check the buyers credit history
  • Title insurance fee – Insures against issues with the legal title
  • Recording charges – To record the deed at the local records office
  • Prepaids – Homeowners insurance, interest, and property taxes

Michigan home sellers commonly pay for:

  • Agent commissions – Paid to the real estate agents involved
  • Transfer taxes – Based on the sale value and location
  • Legal fees – For the title company and attorneys
  • Title insurance – Provides coverage for new home buyer
  • Escrow fees – If applicable
  • Prepayment penalties – For paying off mortgage early

Also read: Closing Costs in Missouri: Complete Guide

Different Types of Closing Costs

Loan-related fees (Lender fees)

  • Origination fee
  • Application fee
  • Processing fee
  • Credit report fee
  • Discount points (optional)
  • Underwriting fee (optional)
  • Wire transfer fee (optional)

Third-party fees

  • Appraisal fee
  • Title search fee
  • Title insurance (owner’s and lender’s)
  • Attorney fees (optional, depending on state)
  • Inspection fees (home, pest, etc.)
  • Recording fees

Prepaid items

  • Property taxes (escrow)
  • Homeowners insurance (escrow)
  • Interest (prorated)

Seller costs (may vary)

  • Real estate agent commission
  • Transfer taxes
  • Closing fee

Factors Influencing Closing Costs in Michigan

Several key factors impact how much you’ll pay in closing costs for a Michigan home purchase:

  • Home price – Generally, the higher the price, the higher your closing fees. Costs based on price or loan amount will increase.
  • Down payment – A lower down payment means higher loan fees and recurring mortgage insurance.
  • Financing type – FHA and VA loans often have higher upfront mortgage insurance and funding fees. Jumbo loans above $647,200 also have higher costs.
  • Location – Rates for services like title insurance vary by county. Recording fees also differ across municipalities.
  • Lender – Online/discount lenders may offer lower origination fees than local banks. Shop around.
  • Realtor – Buyer agent commission affects the seller’s side of the closing costs equation.

Also read: Closing Costs in Indiana: What to Expect When You Buy a Home

Who Pays Closing Costs in Michigan?

In Michigan, the buyer and seller split closing costs. By custom, the buyer pays their loan fees, prepaid items, and prorated property taxes/insurance at settlement. The seller handles the commission for their listing agent and buyer’s agent, legal fees, and any negotiated repairs or closing credits to the buyer.

However, the purchase agreement dictates the final split. It’s common for sellers to pay a portion of the buyer’s costs as a closing incentive. And buyers sometimes handle fees typically paid by the seller to ease negotiations. Everything is negotiable.

Who Pays Closing Costs on FSBO in Michigan?

In Michigan, both the buyer and seller in a FSBO (For Sale By Owner) transaction pay closing costs, but the seller typically shoulders a larger portion (6%-10% of the sale price). While they save by avoiding a listing agent commission, they might still be responsible for the buyer’s agent commission if the buyer uses one.

The remaining seller costs involve title fees, recording fees, and potentially some closing service fees. The buyer pays their own closing costs, usually 2%-5% of the sale price, which includes loan origination fees, escrow, and inspection/appraisal fees. Negotiation between buyer and seller can determine how certain costs are ultimately split.

How Much are Closing Costs in Michigan

You’re right, closing costs in Michigan can vary depending on whether you’re buying or selling a home. Here’s a breakdown:

For buyers

  • Expect to pay 2% to 5% of the home’s purchase price.
  • This translates to an average of $4,210.71 according to ClosingCorp, though it can range from $1,600 to $13,000 depending on factors like the home’s value and your loan type.

For sellers

  • Closing costs typically fall within 8% to 10% of the selling price.
  • Considering the median home value in Michigan is $237,236, this translates to $19,000 to $24,000 in closing costs, but the actual amount can vary significantly.

How can I estimate my closing costs in Michigan?

Home PriceBuyer Closing Costs (2% – 5%)Seller Closing Costs (8% – 10%)
$100,000$2,000 – $5,000$8,000 – $10,000
$200,000$4,000 – $10,000$16,000 – $20,000
$300,000$6,000 – $15,000$24,000 – $30,000
$400,000$8,000 – $20,000$32,000 – $40,000
$500,000$10,000 – $25,000$40,000 – $50,000

Closing Costs in Michigan for Refinance

Those refinancing their mortgage in Michigan can also expect to pay closing costs, but generally around 2-5% of the loan amount.

Typical refinance closing costs for Michigan homeowners include:

  • Appraisal fee
  • Credit report fee
  • Flood certification fee
  • Tax monitoring service fee
  • Recording fees for new mortgage
  • Title – search, binder, exam, insurance
  • State/local tax stamps if applicable
  • Lender origination fees
  • Prepaid interest
  • Escrow account deposits

Closing costs are typically higher for cash-out refinances compared to rate/term refis since the loan amount is larger. Home buyers can use online refinance calculators to estimate total fees based on their specifics.

Getting multiple refinance quotes is important, as lender charges can vary by over $2,000.

Also read: Closing Costs for Buyers in Florida: Total Calculation

How to Save on Closing Costs in Michigan

  • Negotiate seller concessions: Ask the seller to cover some closing costs.
  • Shop around for lenders: Compare loan options and fees.
  • Choose a competitive lender: Opt for lower origination fees.
  • Improve credit score: Lower score leads to higher fees.
  • Explore homeownership assistance programs: State and local programs might offer grants.
  • Consider a “no closing cost mortgage”: Be aware of potential trade-offs like higher interest rates.
  • Shop around for other services: Compare title insurance and appraisal costs.
  • Ask about potential discounts: Inquire about lender discounts for specific groups.
  • Review the closing disclosure: Ensure all fees are accurate and reasonable.

How to Avoid Paying Closing Costs When Buying a House

While rare, some home buyers want to know if it’s possible to buy a house with no closing costs at all. There are a few ways to accomplish this in Michigan:

  • Leverage seller-paid closing costs: In competitive markets, buyers may request the seller to pay all or a large portion of their closing fees.
  • Use gift funds: Receiving a gift from family toward closing costs is fairly common, making sure there’s proof of transfer.
  • Raise purchase price: Buyers could negotiate raising the purchase price to cover average closing costs, which the seller then pays back at closing.
  • Roll costs into loan: As mentioned above, some lenders will finance closing costs so they are repaid over the loan. Won’t change overall out-of-pocket expense but will avoid upfront payment.
  • Grants or down payment assistance: First-time buyer programs specifically target closing costs at times. VA and USDA loans include some grants.

However, paying zero closing costs often involves trade offs – higher home price, rates, or gift sourcing requirements. For most Michigan buyers, paying reasonable closing fees, negotiating where possible, and budgeting accordingly is the optimal approach.

Finding Your Ideal Real Estate Partner

An experienced real estate agent that specializes in Michigan home sales is uniquely equipped to help home buyers and sellers navigate closing costs. They assist with competitive purchase offers, negotiate fees in purchase agreements, and often have relationships with preferred lenders and title reps.

Here are some tips for finding the right real estate partner:

  • Look for 5+ years experience in your Michigan city/county
  • Verify they have strong local references from past buyers/sellers
  • Ask about their pricing and fee negotiation strategies
  • Make sure they provide fully itemized closing cost estimates

The right agent should be able to illustrate local closing cost norms as well as opportunities unique to each home sale to reduce fees for their clients.

They’ll work hard to maximize sale proceeds for sellers while also securing maximum value and savings for home buyers.

Conclusion

Closing costs are a significant part of any Michigan real estate transaction that both home buyers and sellers must prepare for. Closing fees typically fall in the 2-5% range for buyers and 6-10% range for sellers based on common local rates.

However, total costs vary based on loan type, home price, location within the state, the companies used, and ability to negotiate. Shopping around and researching programs as well as utilizing an experienced real estate professional are key ways Michigan home buyers and sellers can get the best value and minimize expenses.

Frequently Asked Questions (FAQ)

How much are closing costs for buyers in Michigan?

Closing costs for buyers in Michigan typically range from 2% to 5% of the purchase price, with an average around 2.7%. This can vary depending on several factors like home price, loan type, location, and negotiations.

Who pays most of the closing costs?

In Michigan, sellers typically pay more in closing costs than buyers. This includes realtor commissions, which can amount to 6% to 10% of the sale price. However, buyers are still responsible for their own set of closing costs.

How much are taxes on a house sale in Michigan?

Property taxes in Michigan are not directly related to closing costs. They are calculated based on the property’s taxable value and the local millage rate, and are an ongoing expense for homeowners, not a one-time closing cost.

What do sellers pay for closing costs in Michigan?

Sellers in Michigan pay around 6-10% of the total sale price in closing fees. This includes the real estate commission, transfer taxes, legal fees, title insurance, and more. For a $200,000 sale, a seller would pay around $12,000-$20,000 on average.

Do closing costs change if you buy from an FSBO seller?

Buyer closing costs generally don’t change if purchasing from a for-sale-by-owner (FSBO) seller without an agent. However, FSBO sellers may save on agent commissions, which are typically 5-6% of sale price.

Can you negotiate closing costs when buying a house?

Yes, buyers can negotiate with the seller on who pays which closing fees during contract negotiations. This is common when making an offer in competitive housing markets.

Can buyers ever avoid all closing costs?

There are some cases where buyer closing costs can be $0 – through seller concessions, lender programs, grants, or personal gifts. However, the tradeoffs often impact home pricing, interest rates, or require proof of gifted funds.

Jean Folger

Jean Folger brings over 15 years of expertise as a financial writer, specializing in areas such as real estate, investment, active trading, retirement planning, and expatriate living. She is also the co-founder of PowerZone Trading, a firm established in 2004 that offers programming, consulting, and strategy development services to active traders and investors.

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