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In Michigan the seller's tax bill can be badly misleading. Proposal A caps yearly growth in a home's taxable value at 5% or inflation, whichever is lower, but the cap is lifted the year after a sale. Taxable value then resets to half of market value, so a long-held home's taxes can jump sharply for the new owner. Ask the local assessor's office, or a property tax estimator, what the bill will be after the sale.

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Starting values: $254,200, which is the Michigan median (40th of 51), 20% down and a 7.40% rate. Monthly cost: $1,750.52 ($1,408.02 loan, $250.00 property tax, $92.50 homeowners insurance). Put 5% down and add PMI and it rises to $2,115.15.

Homestead exemptions and property tax relief

The Principal Residence Exemption exempts an owner-occupied home from up to 18 mills of local school operating tax, often the largest single piece of the bill. File form 2368 with your city or township by June 1 (or November 1) to have it apply to that year's bills. Lower-income owners may also qualify for the Homestead Property Tax Credit on their state income tax return.

First-time buyer programs

The Michigan State Housing Development Authority pairs its MI Home Loan with the MI 10K DPA Loan, an interest-free loan of up to $10,000 for down payment, closing costs and prepaids. It is available statewide to first-time buyers and to repeat buyers in targeted areas, with income limits and a purchase-price limit of $566,355 since June 1, 2026. Homebuyer education is required.

Transfer and recording taxes

The seller pays both transfer taxes: the state rate is $3.75 per $500 (MCL 207.526), and the county rate is $0.55 per $500 (MCL 207.504, which permits up to $0.75 only in a county of 2 million or more people). Together that is about $2,189 on a $254,200 home. Sellers who sell their principal residence for no more than its original value can often claim an exemption from the state tax.

Closing costs to plan for

Buyers mostly pay lender fees, the lender's title policy and recording fees. Because taxes are billed in summer and winter cycles, the prorations at closing can go either way.

When property tax bills are due

Michigan homeowners get two bills a year: a summer tax bill, often due in mid-September, and a winter bill, often due by mid-February. Both are set by local units, so the dates vary.

Before you buy in Michigan

A purchase uncaps the home's taxable value. The following year it resets to the state equalized value, half of market value, so your bill can be much higher than the seller's. File Form 2766, the Property Transfer Affidavit, with the assessor within 45 days of the transfer, and file Form 2368, the Principal Residence Exemption affidavit. It exempts the home from up to 18 school operating mills, and you file it by June 1 for the summer levy or November 1 for the winter levy. The state real estate transfer tax is $3.75 per $500, generally paid by the seller.

2026 loan limit in Michigan

FHFA 2026 one-unit conforming limits: no county is high-cost, so $832,750 applies statewide. So $203,360, the 80% loan on a median home, needs no jumbo financing.

Michigan numbers used above

MeasureMichiganU.S.
Median home value (ACS 2024)$254,200$360,600
Effective property tax rate1.18% (13th highest)0.89%
Average HO-3 premium (NAIC 2023)$1,110$1,737
Median household income$72,389$81,604
Median gross rent$1,168$1,487
Income needed at 28% (20% down)$75,022–

Frequently asked questions

What does uncapping mean?

After a sale, taxable value resets to the state-equalized value, half of market value, so the new owner's bill is often much higher than the seller's.

What is the median-home payment in Michigan?

About $1,750.52 a month on a $254,200 home with 20% down at 7.40%, including tax and insurance.

What income do lenders want for that?

Roughly $75,022 a year under the 28% rule, or $90,649 with 5% down and PMI.

How does Michigan insurance compare?

The 2023 average HO-3 premium was $1,110, below the $1,737 U.S. average.

Sources

See also: all states · house affordability · Michigan paycheck