1.0 — Are You Ready to Start the Homebuying Process?

Before contacting a lender or looking at homes, it’s important to assess whether you’re ready across three areas: financial, lifestyle, and emotional. This creates clarity and reduces surprises during the process.

Financial readiness includes:

• Consistent income for the past 1–2 years
• Manageable monthly debts
• Savings for initial costs (earnest money, inspection, appraisal)
• An emergency fund beyond your down payment

Lifestyle readiness includes:

• Plans to stay in Michigan for at least 2–3 years
• Comfort with basic home maintenance
• Understanding Michigan property taxes, uncapping, utilities, and seasonal expenses
• Awareness of the responsibilities of owning vs. renting

Emotional readiness includes:

• Comfort making decisions under time constraints
• Willingness to handle the normal ups and downs of the process
• Trust in your agent and the step-by-step system you’re learning

You don’t have to feel perfect — you just need clarity and a willingness to move forward one stage at a time.

1.1 — Getting Pre-Approved the Right Way

Pre-approval determines your buying power, your estimated monthly payment, and how strong your offers will be. A clean pre-approval is essential in competitive Michigan markets.

Lenders evaluate:

• Income and employment history
• Current debts and credit score
• Savings and liquid assets
• Down payment amount and source
• Loan type (Conventional, FHA, VA, USDA)
• Financial stability and documentation

Avoid during pre-approval:

• Opening new lines of credit
• Large purchases (cars, furniture, appliances)
• Switching jobs or income structure suddenly
• Moving money between accounts without documentation

A strong pre-approval can significantly improve your chances of winning in Michigan markets such as Oakland County, Livingston County, and Washtenaw County.

1.2 — Documents You’ll Need for Pre-Approval

Having your documents ready helps your lender issue a fast, accurate, and strong pre-approval.

For W-2 employees:

• Last 2 years of W-2s
• Last 30 days of pay stubs
• Last 2 months of bank statements
• Driver’s license or government ID
• Documentation of bonus or overtime income, if applicable

For self-employed buyers:

• Last 2 years of full tax returns
• Year-to-date profit and loss statement
• Business bank statements
• Documentation of consistent income

If using gift funds:

• A completed gift letter
• Proof of transfer into your account
• Donor’s bank statement if required by the lender

The cleaner and more complete your documentation, the smoother your pre-approval process will be.

1.3 — Credit Pulls and Shopping Lenders

Many buyers hesitate to shop lenders because they fear hurting their credit score. Mortgage inquiries work differently from other types of credit pulls.

How credit pulls work for mortgages:

• Multiple mortgage inquiries within a 45-day window count as one inquiry
• Soft pulls may be used for pre-qualification, but full pre-approval requires a hard pull
• A hard inquiry typically has a small and temporary impact

Why you should shop lenders:

• Rates can vary between lenders
• Closing costs and fees differ
• Some lenders offer better PMI terms, which can significantly impact your payment
• Incentives or special loan products may apply to your situation

Shopping smart helps you secure the best overall loan terms.

1.4 — Comparing Loan Estimates

Not all Loan Estimates are equal. It’s important to understand the differences so you can choose the most cost-effective loan.

Key items to compare:

• APR (the true cost of borrowing, including lender fees)
• Origination and lender fees
• Mortgage insurance cost and requirements
• Discount points used to buy down the interest rate
• Escrow setup amounts
• Daily interest charges

Red flags to watch for:

• “No-fee” lenders who hide costs in higher interest rates
• Extremely low advertised rates that require many discount points
• Estimates missing PMI or escrow details
• High origination or broker fees

The goal is to secure the best overall loan, not just the lowest headline rate.

1.5 — Michigan Down Payment Assistance Programs

Michigan offers strong assistance programs, most notably through MSHDA, which can dramatically reduce upfront costs.

MSHDA highlights include:

• Assistance for down payment and closing costs
• Income and purchase price limits
• Additional benefits in certain zip codes
• Compatibility with several loan types
• Available for first-time buyers and, in some cases, repeat buyers

Your lender can help determine your eligibility and which programs best fit your situation.

1.6 — Should You Wait or Buy Now? Understanding Michigan Market Timing

Buyers often wonder whether they should wait for lower interest rates. Michigan’s market often follows seasonal patterns more than rate patterns.

Michigan seasonality trends:

• Winter: fewer buyers, more negotiating power
• Spring: most competitive season with fast sales
• Summer: high demand and high activity
• Fall: strong opportunities with motivated sellers

Key considerations:

• Home prices often increase faster than rates decrease
• You can refinance later if rates fall
• Buying when you’re financially ready is better than trying to time the market

Trying to perfectly time the market is difficult; being prepared is much more valuable.

Key Takeaways

• Readiness is a combination of financial stability, lifestyle alignment, and emotional preparedness.
• A strong pre-approval is the foundation of your entire homebuying experience.
• Michigan assistance programs like MSHDA can significantly reduce upfront costs.
• Shopping lenders will not harm your credit when done correctly.
• Understanding these fundamentals prepares you for Module 2, which covers Michigan’s unique homeownership costs and property tax structure.

Resources

Michigan Property Tax Estimator:
https://treas-secure.state.mi.us/ptestimator
MSHDA Down Payment Assistance Programs:
https://www.michigan.gov/mshda
Mortgage Calculator:
https://livinginmichigan.com/mortgage-calculator/