How to Budget for a Home
Ready to start on your journey to purchasing a home in Michigan? Wondering how to set your budget?
Knowing market trends specific to Michigan areas, understanding your home buying power, and getting pre-approved are all ways to set a budget for buying your Michigan home.
Picture this: crisp autumn air swirling leaves around your front porch, the cozy glow of a fireplace warming your living room, and the thrill of finally calling a piece of Michigan your own. Sounds pretty idyllic, right? But before you start packing boxes, it's time to grab your compass and navigate the ever-shifting currents of the Michigan real estate market.
What is the real estate market like in Michigan?
The National Association of Realtors (NAR) reports a national median home price of $403,800, a staggering 11.3% increase from last year. But compared to this national average, Michigan home prices tell a slightly different story.
Here in the Mitten State, Zillow estimates a median home value of $342,461, offering a more affordable option compared to coastal giants like California. Understanding your local market's trends, growth projections, and inventory levels is your first step to finding the perfect harmony between your dreams and your budget.
What are local Michigan home market trends?
Michigan's real estate landscape is dynamic a tapestry woven from diverse regions and economic forces. For example, Detroit, fueled by revitalization efforts, saw a 15.8% median home price increase in 2023 (Detroit Free Press), while Grand Rapids boasted a steady 6.4% growth (Zillow). Knowing these patterns empowers you to make informed decisions and avoid overpaying in hot pockets.
Get more in depth details about Grand Haven, Michigan and surrounding areas in this quick article Top Things to know about Michigan Real Estate in 2024.
“West Michigan continues to see strong growth, with Muskegon as the second fastest growing metropolitan area in the state. This makes it an attractive market for both buyers and sellers.”
The best way to understand your local Michigan home buying market? Ask a professional. We can guide you in determining the best budget and realistic expectations for when and where to look.
Setting a Home-buying Budget
Your dream home shouldn't come at the cost of financial anxiety. The "28/36 Rule" provides a helpful framework.
What is the 28/36 Rule? No more than 28% of your gross monthly income should go towards mortgage payments, and keep your total debt burden below 36%.
According to Bankrate:
Front-end ratio (28 percent): The maximum percentage of gross monthly income you should spend on housing.
Back-end ratio (36 percent): The maximum percentage of gross monthly income you should spend on all of your debt, including housing. This is also known as your DTI, or debt-to-income ratio.
“28/36 Rule: No more than 28% of your gross monthly income should go towards mortgage payments, and keep your total debt burden below 36%. ”
Remember, property taxes, homeowners insurance, and potential maintenance are the hidden notes in your financial symphony; don't forget to factor them in too!
Consulting a local financial advisor or mortgage professional can help you compose a budget that harmonizes your dreams with your financial reality.
Should You Get Pre-Approved Before Searching?
Imagine this: you find your dream home, only to discover your financing falls short. Getting pre-approved for your mortgage before beginning your house search will help you set a realistic budget and avoid disappointment.
If you start looking at houses above your budget, it is much more difficult to adjust to your price range.
Getting pre-approved before you start house-hunting equips you with a clear understanding of your borrowing capacity. This knowledge translates to competitive offers, smoother negotiations, and avoiding the heartbreak of dashed hopes. Most pre-approvals last 90 days (Bankrate), giving you ample time to find your perfect home and have the option of making an offer as a serious buyer.
“Get pre-approved to set a realistic budget. Most pre-approvals last 90 days.”
In today’s competitive housing market, it is more important than ever to be ready to put in your bid at a moment’s notice, or risk missing out on a great home.
Feeling overwhelmed or unsure about where to start? We can help!
Buying a home is a major life decision and we want to make this a great experience for you. Give us a call now or send us an email to see how we can help.
The financial information in this article isn't financial advice or a recommendation. Instead, the content is intended for informational purposes only.