4 Mortgage Questions Every Metro Detroit Buyer Should Ask Before Closing

I sat down recently with Vincent Newsome from National Mortgage Funding to talk through the questions I hear most from buyers, and a few of the answers surprised even me. If you’re house hunting anywhere in Metro Detroit, especially in one of our water communities like Gibraltar, Grosse Ile, Flat Rock, Trenton, Rockwood, or Woodhaven, these four topics come up constantly. Here’s what I learned.

Does Buying a Home on the Water Change Your Financing?

If you want a closer look at one of our water communities, my Grosse Ile Community Guide is a good place to start.

The short answer is not as much as people assume, but flood zones are the one piece worth understanding early. Every property gets checked against FEMA’s flood maps, and if you’re financing with a mortgage, your lender will run a flood certification to see whether the home falls inside a flood zone. That check continues for the life of your loan, not just at closing.

If a home is in a flood zone and you’re paying cash, flood insurance is entirely up to you. But if you’re financing, and the home is in a flood zone, your lender will require a separate flood insurance policy, and it gets built into your monthly payment through escrow, even if you’ve chosen not to escrow your property taxes or homeowner’s insurance.

My advice is simple. Before you fall in love with anything on or near the water, pull the FEMA flood map yourself or ask me to pull it for you, and loop your lender in early so there are no surprises once you’re under contract.

Rate Buydowns vs ARMs, What’s the Difference?

These two get thrown around a lot right now, often with conflicting advice attached. Here’s how Vincent breaks them down.

A rate buydown works by setting aside a chunk of money that covers the difference between your permanent rate and a temporarily lower rate. With a 1-0 buydown, for example, your rate is one percent lower for the first twelve months, funded by that set aside money, and then it returns to your original rate. Right now, a lot of lenders are actually covering that cost themselves as a promotion, betting that rates will come down enough for buyers to refinance before that year is up.

An ARM works differently. You’re locked into a lower rate for a set number of years, commonly five or seven, on a thirty year amortization schedule. After that initial period, your rate adjusts once a year within set caps, often around two percent per adjustment with a five percent lifetime cap, though this varies by lender. In a market like this one, a five or seven year ARM can offer real savings up front, especially if you have a realistic plan to refinance if rates drop within that window.

Neither option is automatically the right move. It comes down to how long you plan to stay in the home and what you’re comfortable with if rates don’t move the way you hope.

The Right Way to Use Gift Funds for Your Down Payment

Family helping with a down payment is more common than people think, and there is a right way and a wrong way to receive that money. Lenders do not want to see a Venmo transfer. What they want is a documented wire transfer straight from the person gifting the funds to the title company, which holds it and credits it toward you at closing.

If a wire isn’t an option, a check can work too, but your lender will want a copy of that check along with proof that the exact same amount was deposited into your account, so everything lines up cleanly. The biggest piece of advice here is timing. Talk to your lender before any money moves, not after. Getting the documentation right from the start prevents almost every delay I see with gift funds.

If you want more on this relationship, I wrote about what your lender wants you to know before you buy.

Is That “House” Actually a Condo?

This one trips up more buyers than almost anything else. Site condos, which are common across Michigan, look and feel like a regular detached single family home, often with an HOA. Financing treats them almost like a standard home, with one key difference, your lender still has to verify HOA dues even if the appraisal itself gets waived.

Attached condos involve more. Lenders need what’s called a condo questionnaire, which looks at things like whether the building has upcoming construction planned, whether there are outstanding insurance claims, and whether other owners are behind on HOA dues. None of this is difficult, but it does mean more documentation, and that can add time to your closing if it isn’t started early.

If you’re not sure whether a property you’re considering is condo platted, that’s exactly the kind of thing I check before we write an offer, so nobody gets caught off guard partway through the transaction.

If you’re just starting your search, my post on getting started as a home buyer in Metro Detroit is a good next read.

Common Questions About Financing a Home in Metro Detroit

If you’re weighing any of these questions for your own home search, I’d love to help you sort through it. I’m Leslie E. Martin, and I look forward to helping you make your next move.