Although a traditional mortgage is the go-to financing option for many homebuyers, this method is not always accessible to Detroit residents. The number of people buying a home in the Motor City has been increasing over the years, but mortgages still rely heavily on steady income and credit. This often means that many homebuyers are locked out of the market, even with the low home prices. Fortunately, there are alternatives. Here are four financing options for buying a home in Detroit.
Traditional Mortgage
The 2008 market crash affected the Detroit housing market and limited the ability of many prospective buyers to obtain a traditional mortgage. According to a Bridge Magazine report, this form of lending only accounted for 21 percent of all homes for sale in Detroit deals in 2017. This is low compared to the 40 percent national average. When used, mortgages are more common in affluent neighborhoods.
Nonetheless, the total number of mortgages in Detroit has been increasing annually since 2012 and things are improving. This makes a traditional mortgage a great way to finance your purchase if you have proof of income and a good credit score. You should know that you will need to put up a down payment of at least 20 percent of the property’s value for the sale. However, you can explore more affordable options, such as a government-backed FHA loan or Veterans Affairs mortgage.
Cash
Cash is a popular way to finance home purchases in Detroit, largely due to the low housing prices. The median home sale price in the area is currently $84,000, which is significantly lower than the national average ($416,100) and tends to attract investors. Buyers are drawn to the low prices and opportunity to unlock a high ROI after renovations and a predicted economic upturn. Unfortunately, many of these buyers are affluent and tend to swoop in on desirable properties, cutting out local residents who may not be able to raise the cash as fast.
Detroit Home Mortgage
Offered through the Flagstar, Liberty, Chemical, Huntington, and Independent banks, the Detroit Home Mortgage (DHM) is a financing program that helps homebuyers purchase and renovate homes in Detroit. DHM offers financing of up to $75,000 more than the appraised value of a home to compensate for the low assessment values characteristic of the Detroit housing market. Following an initial appraisal, the bank will usually offer a first mortgage for 96.5 percent of the assessed value and a second mortgage for the balance up to $75,000. This is a viable option for fixer-uppers.
Detroit Land Bank
The Detroit Land Bank offers an option to purchase renovated or as-is homes from their collection of over 100,000 homes and lands. Known as the Rehabbed & Ready program, this arrangement is run through a daily auction with run-down properties available for as low as $1,000. Homebuyers must renovate the home fast, usually within 6 months of the purchase. Every listing will usually include the sale price and the estimated cost of renovation.
Explore the Detroit Real Estate Market with Austin Black
With all these financial options, some more reliable than others, the Detroit real estate market can be difficult to navigate on your own. Contact Detroit real estate expert Austin Black for professional guidance on how best to purchase your home and protect your financial interests. Austin will also reveal an extensive catalog of active listings, including houses, condos, and luxury properties for sale in Detroit.
