The value of homes sold in Ann Arbor is currently around $489,157 (Zillow Home Value Index, as of 2026, up 3.6% from the previous year). If you purchase a home at this price with a 20% down payment, the loan principal would be approximately $391,000. Applying the recent average fixed interest rate of 6.6% from Freddie Mac PMMS, the monthly principal and interest payment would be around $2,500. When taxes and insurance are added, the actual monthly payment will be higher. For first-time homebuyers, it's important to start with an understanding of these numbers.

Let's first look at how much down payment you need to prepare. FHA loans require a 3.5% down payment if your credit score is 580 or higher, and 10% if your score is between 500 and 579. Conventional loans can start at 3% for first-time homebuyers or those with an income at or below 80% of the area median income, but typically around 5% is common. If the down payment is less than 20%, a mortgage insurance premium (PMI) will be required, which is an additional cost that lenders require to mitigate their risk. If you put down more than 20%, this cost is waived.

Your credit score directly affects your interest rate. Recent data shows that a score above 780 corresponds to a rate of 6.59%, 760s to 6.66%, 740s to 6.75%, and 700s to 6.91% for a 30-year fixed mortgage (according to The Mortgage Reports). If you're unfamiliar with the terms, think of it this way: for every 40-point drop in your score, the interest rate increases slightly, which means your monthly payment also increases. Checking your credit report before getting pre-approved is the first step.

During the pre-approval stage, you need to prepare your W-2s or tax returns for the last two years, recent pay stubs, bank statements, and a list of debts. The lender will use this information to calculate your DTI, or debt-to-income ratio, which means the lower this ratio, the higher your chances of approval and better interest rate terms. Having a pre-approval letter can also enhance your negotiating power when making an offer.

It's safe to estimate closing costs to be between 2% and 5% of the loan amount. This includes appraisal fees, title insurance, and loan origination fees. After the contract is signed, a home inspection is typically conducted to check the structure, plumbing, and electrical systems, and property taxes and insurance are usually paid monthly through an escrow account. Between fixed-rate and adjustable-rate mortgages (ARMs), if you plan to stay in the area long-term, a fixed-rate mortgage is more stable, while an ARM with a lower initial rate may be worth considering if you plan to move within five years.

The effective property tax rate in Michigan averages around 1.15%, and the median property tax bill is reported to be $2,102 annually (according to Tax by County). The Michigan State Housing Development Authority (MSHDA) offers a program called MI 10K DPA for first-time homebuyers, providing up to $10,000 in interest-free, no-monthly-payment loans, which must be repaid when the home is sold or refinanced. Eligibility requires a credit score of 640 or higher, income below the county limit, and a purchase price below $566,355, along with completion of a homebuyer education course. However, specific income limits and conditions may vary by county, so it's important to check.

PMI will automatically disappear once the loan balance drops to 78% of the home value. When making an offer, you should also prepare earnest money, which is typically set between 1% and 3% of the purchase price. Additionally, the monthly homeowners insurance premium is included in the escrow, so it's advisable to review your total monthly expenses when consulting with a lender. After pre-approval, you can lock in your interest rate for a specified period, usually set between 30 to 60 days.

Neighborhoods with highly rated school districts preferred by Korean families tend to see rising prices. School district ratings can be checked through GreatSchools or Niche, but since district boundaries change frequently, it's advisable to verify the assigned school for the specific address before purchasing. If you're moving from another state, relying on property tax or insurance rates from your previous residence may lead to missing important details, so it's safer to calculate Michigan's tax rates and insurance separately. This article does not constitute investment or legal advice, and it is recommended to consult with a lender and real estate professional before finalizing any contracts.