Average Closing Costs in Michigan

Based on a loan of $200,000, with a down payment of 20%, Michigan homebuyers can expect to pay an average of $1,072 for lender fees and $746 for third-party fees, for a total of $1,818 in closing costs.This is below the national average of $1,847 and the 17th lowest of all the states. Michigan's neighboring state to the south, Ohio, has the lowest closing costs in the country at $1,633.

Some of the more common closing costs include an average of $1,123 in origination fees, $417 for a property appraisal, $450 for legal or settlement costs, $347 for a property survey and $125 for inspections. Title insurance fees, which are calculated separately, can add as much as $1,000 to the total costs. Prepaid items, such as property taxes and homeowners' insurance, also add to out-of-pocket costs. After receiving the loan application, lenders provide a good faith estimate outlining all of the closing costs. Lender fees are typically locked in, while third-party fees can vary by as much as 10% at the time of closing. 

Spurred by a huge inflow of high-technology and research-and-development investments, Michigan’s economy ranked 13th out of the 50 states in 2015. The unemployment rate also plummeted from 9% in 2012 to 5.4% in 2016. The ultimate beneficiary of this economic turnaround has been the state’s housing market, which is among the hottest in the country.

However, with that success comes challenges for homebuyers, as the demand for housing is outstripping supply. Too many homebuyers chasing too few homes are driving up housing prices. The median home value in Michigan is $121,000, which is up more than 30% since 2012 but still below the pre-housing bubble peak of $140,000. That is still affordable for many people, but homebuyers have to be aware of closing costs, which can add thousands of more dollars to a home purchase. When comparing closing costs among lenders, it is important to know what kind of fees are involved and what the average Michigan homebuyer can expect to pay.

What Goes Into Closing Costs in Michigan

Loan Origination Fee: This fee, which covers most of the lender’s costs for processing the loan, typically amounts to 1% of the loan value. The fee is expressed in points, with one point equal to 1%. With most loan products, buyers can ask the lender to add points in exchange for a lower loan interest rate. They can also ask that the points be added to the loan as a way to minimize their out-of-pocket costs.

Appraisal Fee: Before approving the loan amount, lenders require an appraisal to verify the value of the home. Lenders need to ensure that the property’s value supports the sale price and that it is reasonable in comparison to similar homes in the neighborhood.

Tax Service Fee: In the event of a default, mortgages are subordinate to county tax liens for collection. To protect themselves, lenders may require a buyer to pay the property taxes into an escrow account, which they monitor to ensure that taxes are current.

Settlement Fee: All of the legal functions involved in settling escrow are performed by an attorney hired by the lender. Buyers may hire their own attorneys to review the settlement, but it is an added expense.

Title Insurance: In Michigan, buyers are required to purchase a title insurance policy on the lender to protect its position as first lien holder in the event that any title defects emerge after the sale.

Home Inspection: Lenders may require a pest inspection if they suspect infestation. In some areas, homebuyers may want to pay for a radon inspection and, if applicable, a well water inspection. If the buyer wants a complete home inspection, the cost can sometimes be added to the closing costs.

Minnesota (MN): Average Closing Costs

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