Question:

What does it really cost to purchase a home?

 Answer:

First, it’s imperative to have an understanding of the required services and what they can cost when buying a home. Second, see a common example with real numbers. Third, I’ll share some differences to expect with specific types of transactions that may apply to your unique situation. Finally, I’ll detail some great options for buyers looking to keep their initial investment low on a home purchase. To keep timely, I won’t explain what these services are, what they’re for, or why they’re required. Want to know more? Let me know.

1. SERVICES ON A HOME PURCHASE:

DURING TRANSACTION

Inspection - $400-800

Appraisal - $450-550

LENDER

Origination/Lender Compensation - 0.0-2.0% of loan amount

Discount Points - 0.0-3.0% of loan amount

Underwriting Fee - $0-1200

Processing Fee - $0-1000

Lender Misc Fees - $150-300

ATTORNEY

Settlement Fee - $300-700

Title Policy - $500-2500

Attorney’s Misc Fees - $100-200

REAL ESTATE BROKERAGE

Broker Compensation - 0.0-3.0% of sales price

Broker Transaction Fee - $0-1250

OWNERSHIP COSTS AT CLOSING

PROPERTY SPECIFIC

Property Tax Prorations - 0.0-100.0% of the year’s property taxes

Homeowners Insurance Premium - $1000-2500

Homeowner Association Transfer Fee - $50-150

DOWN PAYMENT

Down Payment - 0.0-100.0%

2. EXAMPLE:

$400,000 single family home without a homeowners association

$320,000 conventional loan (20% down)

Inspection - $550

Appraisal - $495

Origination/Lender Compensation - $3200

Discount Points - $0

Underwriting Fee - $895

Processing Fee - $0

Lender Misc Fees - $150

Settlement Fee - $595

Title Policy - $1222

Attorney’s Misc Fees - $195

Broker Compensation - $0

Broker Transaction Fee - $0

Property Tax Prorations - $4500

Homeowners Insurance Premium - $1700

Homeowner Association Transfer Fee - $0

Down Payment - $80,000

TOTAL

$13,502 before the $80,000 down payment.

3. DIFFERENCES TO EXPECT:

When purchasing a home and NOT getting a loan, many of these fees to do not apply. You won’t have an appraisal, won’t have any lender fees, will have a settlement fee of 1/2 the price, and won’t have a title policy fee. That’s a savings of over $6000.

When putting less than 20% down on a home, almost all lenders will require you to ‘escrow’ for property taxes and homeowners insurance. This simply means they’ll require a portion of next year’s bills to be paid upfront, and an additional portion paid each month as part of your mortgage payment. 

When getting a FHA, VA, or USDA loan, you’ll be required to pay an upfront lending fee (Up Front Mortgage Insurance Premium (FHA), Funding Fee (VA), or Guarantee Fee (USDA)) to use their loan program. Note: if you’re a veteran and receiving VA Benefits, there’s no Funding Fee.

4. GREAT OPTIONS FOR BUYERS LOOKING TO KEEP THEIR INITIAL INVESTMENT LOW:

There’s still a common misconception that you’re required to put 20% down when purchasing a home. That’s certainly not true and very rare for first time home buyers, let alone repeat buyers. A conventional loan only requires a down payment of 5%, and many lenders have programs offering as low as 1% for eligible buyers, giving more people the opportunity to achieve homeownership.

An amazing program sponsored by the state of Michigan is MSHDA’s MI Home Loan Program. This is a conventional loan program that requires only 3% down, and comes with a $10,000 grant to be used at closing to cover a portion of your costs. This program does have eligibility requirements, but many first-time home buyers qualify for it, and even some repeat buyers can, too.

Have a Merry Christmas!

- Jeff 12.16.25

Question:

What are the pros/cons of placing your home in a revocable living trust?

Pros:

- Your property will avoid probate court when it's eventually transferred to your designated heirs.

- Your heirs will receive the IRS's 'Step Up in Cost Basis' income tax benefit.

- Your asset remains protected from many liabilities during your lifetime.

- Your property and estate will have a higher level of privacy.

Cons:

- You'll need to hire an attorney to prepare/file the proper documentation.

- Selling or refinancing the property in the future will require additional paperwork.

Correcting Two Common Misconceptions:

- If done correctly, placing your home in a trust does NOT limit your control of the house during your lifetime.

- If done correctly, placing your home in a trust does NOT uncap your property taxes or lose your homestead exemption.

In summary, if you're young, healthy, and without a significant amount of equity in your home, you likely don't need to consider this option right now. As you get older, build wealth, and start estate planning, a revocable living trust is something to look into further. At a minimum, your heirs will thank you. Have a great Thanksgiving!

- Jeff 11.18.25

Question:

What happens to my house when I die and what should I do now to prepare?

Answer:

After starting to write this I quickly realized it’s impossible to cover the topic thoroughly within this newsletter’s quick/digestible format. Instead of bypassing the question altogether, let’s focus on a common mistake that can cost your heirs huge amounts of money and reveal a better solution you should consider.

WHY YOU SHOULD NEVER PUT YOUR HEIR ON TITLE BEFORE YOU DIE.

The county that you live in has a number of different courts, one of which is the probate court. A responsibility of the probate court is to direct the transfer of assets from your estate after your death. Ask someone that’s gone through this process. It can be costly, time consuming, stressful, and is always public. Rightfully so, savvy people will take steps while they’re alive, for their heirs to avoid probate court as much as possible. Putting your heir on title to your house, prior to your death, accomplishes the goal of avoiding probate court, but it comes with two large pitfalls that are often overlooked.

1.Loss of the ‘Step Up In Cost Basis’ Tax Benefit

When your property is inherited (with/without a will OR with/without a trust), your heir receives an income tax benefit known as the ‘step up in cost basis’. This benefit isn’t realized until after you die AND until after the asset is sold by your heir. Because it’s seemly so far in the future, many people completely overlook it. Here’s an example to demonstrate how mom cost her daughter over $22,000 with one subtle mistake.

Scenario 1

In 1980, mom and dad buy a house for $100k.

In 2020, mom is now widowed and puts her only daughter on title to avoid probate.

In 2022, mom passes away and the property is seamlessly transferred to the daughter avoiding probate court. The house is worth $400k at the time.

In 2024, daughter decides to sell the house and gets $420k for it. The daughter’s profit from the sale is subject to capital gains.

Capital gains calculation for Scenario 1:

(15%*(420,000*50%-100,000*50%)) + (15%*(420,000*50%-400,000*50%)) = $25,500 in federal income tax due (add another 4.25% in MI income tax)

Scenario 2

In 1980, mom and dad buy a house for $100k.

In 2020, mom is now widowed and puts her home in a revocable living trust for benefit of her daughter to avoid probate.

In 2022, mom passes away and the property is seamlessly transferred to the daughter avoiding probate court. The house is worth $400k at the time.

In 2024, daughter decides to sell the house and gets $420k for it. The daughter’s profit from the sale is subject to capital gains.

Capital gains calculation for Scenario 2:

(15%*(420,000-400,000)) = $3,000 in federal income tax due (add another 4.25% in MI income tax)

The difference here is the Step Up in Cost Basis benefit. In the eyes of the IRS, only half of the property was inherited and received the Step Up. The other half was already owned by the daughter prior to mom’s death, so there’s no Step Up for that portion. I'll avoid getting in the weeds of the tax law further, but know this subtle mistake cost the daughter over $22,000.

2. Open Yourself Up to Unnecessary Liabilities

When you put someone else on title to your home, the asset is now there’s. If they undergo financial hardship, your asset may become vulnerable to creditors. If they get divorced, their ex-spouse may be entitled to a portion of the home’s equity. If they get sued for any reason, the plaintiff’s attorney and judge may come after your house. Those are just a few examples. They may be unlikely, but they are entirely unnecessary.

So what’s a better solution you should consider?

A revocable living trust.

Next month, I’ll go over the pros/cons of holding title in this kind of trust. Hint, for most people there’s almost no cons.

- Jeff 10.9.25

Question:

I'm looking to make a move. How do I navigate buying a new home and selling my current home?

Answer:

There's three different options to the question above. The right answer for you is very dependent on your goals, your preferences, and your financial situation. Anyone in this situation should have an in depth conversation with both their realtor and mortgage broker before making any decisions. Below is a brief summary of each option with their pros and cons as a general starting point.

1. BUY FIRST, THEN SELL LATER

This is a low-stress option that keeps you completely in control throughout the entire process. You'll have time to do improvements to your new home, and move in at a time and pace that is on your own timeline. You'll also be entirely moved out of your old home prior to putting it on the market, so you won't have to accommodate prospective buyers touring your home while you still live in it. Lastly, you could potentially 'time' the market and buy in the winter, sell in the spring. The downside to this option is you'll have two mortgage payments simultaneously for a period of time. You also will not be able to use any of the equity in your current home as a down payment for your new home unless you pull a HELOC on it prior to starting this process. NOTE: many clients cannot qualify for their new home without first selling their current home, so this is not an option for them. 

2. SELL FIRST, RENT, THEN BUY LATER

This is another low-stress option that keeps you in control. You'll sell first, cash out all of your current home's equity, and have it ready to be deployed as you see fit. Many sellers choose this time to rent in a new area of town that they're not sure they'd like to buy in as a low-risk exploration. You get all the normal benefits of renting (flexibility, no unexpected expenses, limited responsibilities, etc). Additionally, in almost all desirable areas of Metro Detroit, your monthly payment is less to rent vs buy in today's market conditions. The downside to this option is obvious. You're now a renter with all the cons to leasing. You won't buy you new longterm home for an extended period of time. You'll need to decide whether to do a traditional 12 month lease and bring your own furniture or do a short/medium term lease and keep your furniture in a storage facility. You'll move twice over a relatively short period of time. Lastly, you'll likely have prospective buyer tours of your current home while still living in it, unless you move into your leased property early.

 3. BUY & SELL AT THE SAME TIME

This is a high-stress option, but in most cases the option clients choose. In today's market, it's difficult for clients to qualify for their new mortgage without first selling their current home, and they don't want to move two times is under 12 months. Clients know what they want in their new home and want it now (that's typically the entire reason for selling their current home in the first place). Going this route you'll never have two housing payments at the same time, you can use the equity in your current home for the down payment on your new home, and you'll still potentially have a small amount of time to do improvements to your new home prior to moving in. The downside to this option is the lack of control over the situation. You're dependent on the seller of your new home closing on time, you're dependent on the buyer of your current home not defaulting or backing out under one of their contingencies to purchase, and you're dependent on your realtor and mortgage broker being outstanding throughout the entire process. If anyone of these people drop the ball, you can be the one that carries the burden through no fault of your own. Another downside is sellers will look down on your offer to purchase their home when they see it is contingent on the sale of your current home. You may have to overbid to win in a competitive situation (all things being equal a seller will always choose a non-contingent offer over a contingent one). On the flip side, if you find the house of your dreams and get your offer accepted, you may have to lower the price on your current home to make sure you get a buyer that can close quickly. Good news, in almost all cases, a great realtor and mortgage broker can mitigate the majority of these concerns, but the risks are still non-zero.

- Jeff 9.16.25

Question:

My wife and I have been thinking of doing some renovations to our home we purchased 8 years ago. We know that a home equity line of credit is a great option, but don't know where to start or how it works.

Answer:

First off, what is equity? Equity is the current value of your home less the total mortgage balance(s) remaining. This can be a large amount of capital that contributes to your net worth, but it's not straightforward on how to access it. In short, you have three main choices to access the equity in your home.

1. Sell the home and take your proceeds

2. Pay off your current mortgage(s) via a 'cash out' refinance with a new larger loan and take the difference in cash

3. Get a Home Equity Line of Credit (HELOC)

- Option 1 is not applicable to the question asked.

- Option 2 is not a great option for most, because a refinance would mean trading a historically low interest rate for one in the 6.0s.

- Option 3 is the best option for most. Banks/credit unions have great options for HELOCs. This would be a second mortgage, separate from your current mortgage. You'd apply, qualify, and pay for this new line of credit just like you did for your initial mortgage, but the process is significantly more streamlined and less expensive. Below is an example.

2017 - Home purchased for $200,000 with mortgage of $190,000

2025 - Home worth $300,000 with mortgage balance of $160,000.

Equity in this example is $140,000 ($300,000-$160,000)

You can apply for a HELOC from a bank/credit union for a portion of that $140,000. Typically banks cap your total mortgages at 90% of the current value, so in this example you could get a line of credit for $110,000 ($300,000 x 90% - $160,000). The great thing about a line of credit is you only pay interest to the bank/credit union on the money you actually draw. You're not required to take all $110,000 and pay interest on it from day 1. It's flexible.

Let's assume you took out a total of $50,000 from the HELOC to do what you wish. You don't have to use this money on your house. You can use it to pay off credit card balances, children's tuition, wedding, or anything else that's most important to you.

$300,000 current value of your home + any potential new value created from renovations/improvements completed on your home

$160,000 first mortgage with a payment of $800/mo (remember, this loan is completely unchanged)

$50,000 second mortgage (HELOC) with a payment of $300/mo

Two last items to note.

- HELOCs are almost always variable interest rates NOT fixed.

- After a period of time (10 years in many cases), banks/credit unions will close the HELOC and require you make a new regular payment on the money you borrowed. This new payment will now include both interest AND principal, so you start paying down the balance on the money you borrowed.

- Jeff 8.12.25