What are closing costs for buyers in Michigan?

When people budget for a house they think about the down payment and forget the second check. Closing costs aren't as big, but they're real, and they show up at the worst possible moment if you didn't plan for them.

What's in there

Every loan is a little different, but here's what I see on most Metro Detroit closings:

• Lender fees. Origination or underwriting fees, a credit report, sometimes points if you're buying down the rate.
• Appraisal. Your lender orders it and you pay for it, usually before closing.
• Title. The lender's title policy and some settlement fees. In our area the seller usually buys the owner's policy for you, which is a nice local custom.
• Recording fees. The county charges to record your deed and mortgage.
• Prepaids and escrow. Your first year of homeowners insurance, a few months of property taxes held in escrow, and daily interest from closing to the end of the month.

Why the tax part catches people off guard

Michigan bills property taxes in summer and winter, and your lender wants enough in escrow to cover the next bill when it comes due. Depending on when you close, that can be a decent chunk. Also, the taxes you'll pay are often higher than what the seller pays now, because the taxable value resets after a sale. I wrote a whole post on why Michigan property taxes go up when you buy because it surprises almost everyone.

Cash you need before closing

A couple of things get paid earlier, out of pocket:

• Earnest money deposit. Goes to the title company when your offer is accepted and counts toward your down payment at closing.
• Home inspection. Paid directly to the inspector, plus extras like a sewer scope or radon test if you do them.
• Appraisal, if your lender collects it up front.

Ways to lower what you bring

• Seller concessions. You can ask the seller to cover part of your closing costs in your offer. It works better in some situations than others, and your agent should tell you honestly whether it'll weaken your offer.
• Lender credits. Some lenders will cover costs in exchange for a slightly higher rate.
• Assistance programs. MSHDA's MI 10K DPA can go toward closing costs, not just the down payment. More on that in our down payment post.
• Shop lenders. Compare Loan Estimates side by side. Fees really do vary.

You'll see the final number before closing

Your lender has to give you a Loan Estimate within three business days of your application, and a Closing Disclosure at least three business days before you close. The CFPB has a good explanation of both. Read the Closing Disclosure line by line and compare it to your Loan Estimate. If something jumped, ask why.

When you're ready to look, you can search every home for sale in Metro Detroit or browse by city, like Royal Oak or Sterling Heights. Every listing page has a payment calculator so you can see the monthly number too.