Buying your first home in Michigan, explained from zero.

Am I ready to buy?

There's no perfect checklist that guarantees you're "ready" — but there are good signs to look for. You're generally in a stronger position to buy when your income is steady, you don't expect a major life or job change in the near future, you've got some savings set aside beyond just a down payment, and you plan to stay in the home for a few years at least (buying and selling quickly tends to be expensive).

None of that means everything has to be perfect. Plenty of first-time buyers start this process with imperfect credit, a modest income, or a smaller savings account than they'd like — and that's exactly why education matters before you start. Knowing where you stand is the actual first step, not a reason to wait indefinitely.

How much money do I actually need?

This is usually the first question on every first-time buyer's mind, and the honest answer is: it depends on your loan type, home price, and local costs. But broadly, you're planning for a few categories of cash:

• Down payment — ranges from 0% (VA/USDA, for eligible buyers) to 3–3.5% (many conventional/FHA loans) up to 20% or more.
• Closing costs — lender, title, and recording fees, often roughly 2–5% of the purchase price, though this varies.
• Home inspection — typically a few hundred dollars, paid directly to your inspector.
• Prepaid expenses — items like the first months of property taxes and insurance, collected upfront to start your escrow account.
• Reserves — money we'd suggest keeping available after closing, separate from the funds above, for the unexpected.

Try our mortgage calculator and cash-to-close estimator for numbers based on your own situation.

Credit score basics

Your credit score is a number, generally between 300–850, that summarizes how reliably you've repaid debt in the past. Lenders use it — along with a lot of other information — to help decide what loan programs you qualify for and what interest rate you might be offered. A higher score generally opens up more loan options and can lead to better pricing, but it isn't the only factor lenders consider.

Before you start house hunting, it's worth pulling your credit reports (not just a score) and checking for errors — incorrect late payments or accounts that aren't yours are more common than people expect, and disputing them early can help.

Debt-to-income ratio (DTI)

Your debt-to-income ratio compares your monthly debt payments (credit cards, car loans, student loans, and your future housing payment) to your gross monthly income. Lenders use DTI as one of the key measures of whether a new mortgage payment fits comfortably within your finances. Different loan programs set different maximum DTI thresholds, and a lower DTI generally gives you more flexibility.

Income and employment considerations

Lenders generally want to see steady, verifiable income and a reasonably consistent employment history — often around two years, though this can vary by situation (for example, self-employment or a recent career change may involve extra documentation). This doesn't mean you need to have worked the exact same job for years; consistency within the same field is often viewed favorably.

Savings and emergency funds

Beyond your down payment and closing costs, most financial educators recommend keeping a separate emergency fund after you buy — since homeownership comes with costs renting typically doesn't, like appliance repairs, HVAC issues, or a roof needing attention sooner than planned. How much is "enough" varies by household and risk tolerance, but arriving at closing with absolutely nothing left in savings is a common source of stress for new homeowners.

Renting vs. buying

Buying isn't automatically the "better" financial move — it depends on your timeline, local market, and personal goals. Renting offers flexibility and predictable costs without maintenance responsibility. Buying can build equity over time and offers more control over your space, but comes with upfront costs, maintenance responsibilities, and less flexibility if your plans change quickly. Generally, the longer you plan to stay somewhere, the more the math tends to favor buying — but that's a general pattern, not a guarantee for your specific situation.

How much house can I afford?

Your pre-approval amount tells you the maximum a lender might lend you — it isn't necessarily what you should spend. A common approach is to work backward from a monthly payment that feels comfortable alongside your other goals (saving, debt payoff, travel, etc.), rather than starting from the top of your pre-approval range. Our mortgage calculator can help you see how different price points affect your monthly payment.

Pre-approval

Pre-approval is when a lender verifies your income, assets, and credit to tell you how much you may be able to borrow, resulting in a pre-approval letter. This is different from pre-qualification, which is a faster but less rigorous estimate. Most sellers expect a pre-approval letter (not just pre-qualification) before taking an offer seriously. See our full breakdown in the homebuying process roadmap.

Realtor/agent representation and buyer agency

"Realtor" refers to a real estate agent who's a member of the National Association of REALTORS® and agrees to their code of ethics — not every licensed agent is a Realtor, though many are. A buyer's agent represents your interests in the transaction, distinct from the seller's agent (sometimes called the listing agent), who represents the seller. Buyer agency means that agent owes you duties like loyalty and confidentiality. Before working with an agent, you may be asked to sign a buyer representation agreement — read it carefully and ask what it commits you to.

Home searching

Once your criteria are set, your agent will typically set up automated alerts matching your preferences so you see new listings quickly in a competitive market. Touring homes in person (not just scrolling photos) is important — photos rarely tell the whole story about condition, layout, noise, or neighborhood feel.

Offers and earnest money deposits

An offer (purchase agreement) lays out your proposed price, timeline, and contingencies. Earnest money is a good-faith deposit — usually held by a title company — showing you're serious, and it's later credited toward your closing costs. Always verify wire instructions directly by phone with the title company using an independently looked-up number, never a number or link from an email, to avoid wire fraud.

Home inspections

A licensed inspector examines the home's condition and gives you a detailed report. This is your opportunity to understand what you're actually buying before you're financially locked in, and, depending on your contract, to negotiate repairs or credits based on what's found.

Appraisals

Your lender orders an independent appraisal to confirm the home's value supports the loan amount — this protects both you and the lender from a loan that exceeds what the home is actually worth.

Underwriting

An underwriter reviews your full financial picture, the appraisal, and the title work to issue final loan approval. Keeping your finances "boring" — no new debt, no job changes, no large unexplained deposits — during this window helps things move smoothly.

Closing

At closing, you'll review and sign your final loan and title documents, pay your remaining cash to close, and ownership officially transfers to you. Michigan closings are typically handled by a title company or closing agent.

Getting possession and what happens after closing

Possession timing (same-day or a specified date) is defined in your purchase agreement. After closing, keep copies of every closing document somewhere safe, update your address with essential accounts, set up utilities if you haven't already, and consider changing the locks as a basic safety step. See our full interactive roadmap for a step-by-step breakdown of this entire process, including what to do right after you get your keys.

Frequently asked questions