VA Loans Michigan

Start Your VA Pre-Approval

Get a payment built on what your taxes will actually be after the reset, not what the seller is paying now.

Who You’re Actually Working With

J.D. Peck, NMLS #314883. 25+ years originating, 3,100+ closed loans, Scotsman Guide Top Originator 2026. Lending in 49 states. VA files are not a sideline here. They are the practice.

Michigan is the state where quoting the seller’s tax bill is closest to malpractice. The number resets the year after you close, and the escrow shortage shows up after you have already moved in.

No State-Specific VA Overlay

Michigan adds no state-level restriction to VA purchase financing. Federal rules apply as written.

Full Property Tax Exemption, No Dollar Cap

Michigan exempts a qualifying disabled veteran’s homestead from property taxes entirely. There is no partial version. State guidance is explicit that the property either qualifies for a 100 percent exemption or it does not qualify at all.

Three Ways to Qualify

A VA determination of permanent and total disability from military service with benefits at the 100 percent rate; a VA certificate for pecuniary assistance for specially adapted housing; or a VA rating of individually unemployable. Any one of the three is enough.

No Annual Refiling Anymore

This changed and a lot of veterans have not heard. For taxes levied on or after January 1, 2025, once the exemption is granted it stays in effect without reapplying every year. You do have to notify the assessor if you stop qualifying.

The Credit Conversion Never Happened

Worth stating plainly because bad information persists. A 2022 law would have replaced this exemption with a capped income tax credit. It was tied to a separate bill that was vetoed and it never took effect. Michigan still has the full exemption.

Surviving Spouse Keeps It, and Can Move

An unremarried surviving spouse keeps the exemption, and Michigan expanded it so the spouse can claim it on a home acquired after the veteran’s death. The hard limit: if the veteran never received the qualifying VA determination while living, the spouse does not qualify.

Special Assessments Still Apply

The exemption covers property taxes. It generally does not cover special assessments for drains, roads, sewer, or street lighting. Those still land in your escrow, so we account for them separately.

You File Form 5107 With the Local Assessor

Not the county, not VA, and not your lender. It goes to your city or township assessor. Because the exemption is granted at the local level, it does not simply transfer with the property at closing.

Military Retirement Pay Is Not Taxed

Michigan does not tax military retirement pay, and as of 2026 the state’s retirement income rollback is fully phased in, so other pension and retirement income is broadly deductible too. Active duty pay is also exempt.

How the cap works

While you own a Michigan home, its taxable value can rise each year only by the lesser of five percent or the inflation multiplier. For 2026 that multiplier is 2.7 percent. Over a long ownership, taxable value drifts far below actual market value.

What happens when you buy

A transfer of ownership uncaps it. In the calendar year following your purchase, taxable value resets to half of the home’s true cash value. If the seller owned it a long time, that reset can be a large jump.

Why it hits in year two, not year one

You typically inherit the seller’s capped number for your first tax year. The reset shows up the following year, which is often after your first escrow analysis. That is why the shortage feels like it came out of nowhere.

We underwrite the uncapped number

We estimate the post-uncapping bill and escrow against it rather than the seller’s figure. It makes the preapproval look slightly more conservative and it makes the payment real.

If you qualify for the veteran exemption, this mostly disappears

A full property tax exemption removes the tax line whether it is capped or uncapped. This is one more reason to sort your exemption eligibility before you shop, not after.

What it does

It exempts your principal residence from up to 18 mills of local school operating tax. On a home with $150,000 of taxable value that is roughly $2,700 a year, straight into or out of your escrow.

You have to file for it

It is not automatic. You file a Principal Residence Exemption affidavit with your local assessor, and Michigan has fixed deadlines during the year. Miss it and you pay the school operating millage you did not need to pay.

Second homes and rentals do not get it

Which is exactly why a Michigan investment property carries a meaningfully higher tax bill than the identical house next door occupied by its owner.

Not Sure What Your Michigan Exemption Is Worth?

Michigan has filing requirements that catch people every year. We price the exemption against the actual parcel before you write the offer.

No cost. No obligation.

No Minimum Credit Score Overlay

VA publishes no score floor. Most lenders impose one anyway. We do not. A refer from automated underwriting starts a manual underwrite. It does not end the file.

We Escrow the Uncapped Number

Most lenders escrow the seller’s taxes because that is what is on the tax certificate. We estimate the reset. You get a payment that survives year two.

Exemption Eligibility Sorted Before You Shop

Full veteran exemption, principal residence exemption, or both. Each one changes what you can carry, and both are filed locally rather than handled at closing.

Retirement Income Counted in Full

Michigan does not tax military retirement pay, and the broader retirement rollback is fully phased in for 2026. That lands directly in residual income.

$0 Down, No Monthly Mortgage Insurance

With full entitlement there is no down payment requirement and no monthly MI, ever. On Michigan price points that is frequently the whole difference between renting and owning.

Manual Underwriting Is Routine Here

Bankruptcy, foreclosure, collections, a rough stretch after separation. We run manual underwrites regularly using the compensating factors VA actually recognizes.

Purchase, First-Time Use

2.15% with less than 5% down, including zero down. 1.5% with 5% or more down. 1.25% with 10% or more down.

Purchase, Subsequent Use

3.3% with less than 5% down. 1.5% with 5% or more down. 1.25% with 10% or more down.

VA IRRRL Streamline Refinance

0.5% flat, regardless of prior use.

Exempt Entirely

Veterans receiving VA disability compensation at any rating, veterans entitled to compensation who take retirement pay instead, surviving spouses receiving DIC, and Purple Heart recipients on active duty. It shows on your COE and we verify before you pay anything.

Bucket 1: Your Closing Costs, No VA Cap

The seller can pay all of your normal allowable closing costs. Origination, appraisal, title, recording, credit report, prepaid taxes and insurance at customary levels. No VA percentage ceiling. Market-rate discount points for a permanent rate buydown also sit here, uncapped.

Bucket 2: Concessions, Capped at 4%

Anything of value beyond normal closing costs is a concession, capped at 4 percent of the VA reasonable value. It stacks on top of Bucket 1 rather than replacing it.

Paying Off Your Debt

The seller can retire your credit cards, collections, or an auto loan as a concession. Dropping a high monthly payment lowers your debt-to-income ratio and can turn a denial into an approval on the same contract at the same price.

Paying Your Lease Break So You Can Buy Now

An early lease termination penalty on a rental or on-post housing is an allowable concession. It is how a family stops paying rent and closes this month instead of waiting for a lease to run out. We have structured this many times.

Prepaying Your Mortgage Payments

A seller can prepay mortgage payments on your behalf as a concession. When a seller would rather not cut the price, this is often an easier yes, and it does more for your file.

The Funding Fee and a 2-1 Buydown

Both count toward the 4 percent and both are commonly seller-funded. A concession package is often easier to win than a price cut, and it does more for your approval than the price cut would.

Every Michigan county uses the baseline

$832,750 for a one-unit property in 2026. Michigan has no high-cost conforming county.

Why that rarely binds here

Michigan home values sit well below the baseline in most of the state, so the limit is academic for most buyers. It matters only when you already have a VA loan open somewhere and we are computing remaining entitlement.

Multi-unit runs much higher

The 2026 baseline reaches $1,066,250 for two units and $1,601,750 for four. In Michigan those figures are far above what small multi-unit property costs, which is why the owner-occupied duplex play works well here.

Macomb County and the Lakeshore

Selfridge anchors the military presence here and the base is in the middle of a long-term mission buildup with substantial construction planned into the next decade. Harrison Township, Chesterfield, Clinton Township, New Baltimore, and St. Clair Shores.

Metro Detroit and Warren

Detroit Arsenal in Warren is a major defense engineering and contracting center with a large civilian and veteran workforce. Warren, Sterling Heights, Troy, Royal Oak, Dearborn, and Livonia.

Battle Creek and Calhoun County

Battle Creek supports both an Air National Guard mission and a large federal logistics workforce, with Fort Custer training grounds adjacent. Battle Creek, Springfield, Augusta, and Marshall.

Grand Rapids and West Michigan

No installation, but one of the strongest housing markets in the state and a deep post-service population. Grand Rapids, Wyoming, Kentwood, Grandville, Holland, and Muskegon.

Lansing and Mid-Michigan

Lansing, East Lansing, Okemos, Grand Ledge, and Charlotte. State government and university employment, steady prices.

Northern Michigan

Grayling, Alpena, Traverse City, and Petoskey. Guard training presence, a large retired veteran population, and seasonal market dynamics worth understanding before you buy.

The Upper Peninsula

Marquette, Escanaba, Sault Ste. Marie, and Houghton. Very affordable, thin lender competition, and a zero-down VA loan goes further here than nearly anywhere.

1. Pull your Certificate of Eligibility

Electronic, usually seconds. If yours needs manual review because of a discharge upgrade, a Guard or Reserve record, or a prior VA loan never restored, we file the paperwork and follow it.

2. Calculate entitlement, not a loan limit

Full entitlement means no VA cap. If you have a VA loan open elsewhere, we compute remaining entitlement against the $832,750 baseline and give you the exact zero-down ceiling.

3. Estimate the uncapped tax bill

Not the seller’s. We work from true cash value and the local millage so the escrow survives the reset in year two.

4. Sort the exemptions

Full veteran exemption if you qualify, principal residence exemption either way. Both are filed with the local assessor and both change the payment materially.

5. Underwrite it, manually if the file needs it

A refer from automated underwriting is not a denial. VA allows a manual underwrite and we do them.

6. Close and handle the funding fee

Financed by default, waived entirely with a service-connected rating, and refundable if your rating came through after a prior VA closing.

Credit score

No minimum. VA does not publish one. We have closed VA loans in the 500s. If a lender quoted you 620, that was their rule.

Down payment

Zero with full entitlement. Not a low down payment. Zero.

Mortgage insurance

None, ever. The single biggest month-to-month advantage VA holds over FHA and conventional.

Debt-to-income ratio

No hard cap. VA uses residual income instead. We have closed well past 50 percent DTI when the residual math supported it.

Bankruptcy, foreclosure, short sale

Chapter 7 at two years. Chapter 13 can work mid-plan with trustee approval and twelve months of on-time payments. Foreclosure and short sale at two years, shorter with documented extenuating circumstances.

Property types

Single family, VA-approved condo, townhome, PUD, manufactured on a permanent foundation, and two to four units if you occupy one.

Buying from a long-time owner

The most common Michigan escrow trap. Twenty years of capped growth means the seller’s tax bill understates yours badly. We price the reset up front.

You qualify for the full veteran exemption

It removes the tax line entirely, which in a high-millage Michigan community is often several hundred dollars a month. It also makes the uncapping question largely moot for you.

You were told you have to refile every year

Not since 2025. Once granted, the exemption stays in place without annual reapplication. You only notify the assessor if you stop qualifying.

Someone told you Michigan capped the exemption at a dollar amount

They are describing a 2022 law that never took effect. Michigan still has the full, uncapped exemption.

You retired here and your income changed

Retirement pay, VA disability compensation, and part-time work qualify differently than salary. Disability compensation is not taxable so it gets grossed up, and Michigan does not tax the military pension.

You want an investment property

VA occupancy rules require you to live in the home. For a pure rental we use DSCR loans that qualify on the property’s rent instead of your income. Remember a rental does not get the principal residence exemption, so the tax line is higher.

541 credit score, zero down

Declined at another lender’s 620 overlay. VA publishes no score minimum. The file went manual, residual income cleared with room, and it closed. Full write-up on VA loans with a 541 credit score.

Escrow shortage that was not the buyer’s fault

A prior file escrowed the seller’s capped taxes. After uncapping the payment jumped and the borrower was blindsided. We now underwrite every Michigan file against the reset, and it has saved several closings from becoming problems.

Lender escrowed full taxes on an exempt veteran

100 percent permanent and total, full Michigan exemption, and the prior lender escrowed the whole bill anyway. The DTI failed on a tax line the buyer would never pay.

Chapter 13 still in repayment

Twelve months of on-time trustee payments plus written trustee approval. VA allows it. Most lenders will not touch it.

Seller paid off the buyer’s auto loan at closing

Dropped the DTI enough to turn a denial into an approval at the same price. Almost nobody in Michigan structures deals this way.

Duplex with rental income counted

Owner occupied one side. The other lender would not count the rental income. VA allows it, and Michigan multi-unit prices sit far below the VA multi-unit limits.

Told No by Another Michigan Lender?

Send me the denial. I will tell you within a day whether it was a real VA rule or that lender’s own overlay. No cost, no obligation, no credit pull to find out.

Down payment

VA: zero with full entitlement. Conventional: 3 to 5 percent minimum. FHA: 3.5 percent.

Mortgage insurance

VA: none, ever. Conventional: PMI until you reach 20 percent equity. FHA: upfront premium plus a monthly premium that usually runs the life of the loan.

Credit score floor

VA: no published minimum. Conventional: generally 620, with real pricing pain under 700. FHA: 580 for 3.5 percent down.

One-time fee

VA: the funding fee, financed, waived entirely with a service-connected rating. Conventional: none, but PMI monthly instead. FHA: 1.75 percent upfront plus the monthly.

Seller-paid costs

VA allows unlimited seller-paid closing costs plus up to 4 percent in concessions, and that bucket can pay off your debt or prepay your payments. Conventional caps at 3 to 9 percent by down payment with no debt-payoff allowance.

Two to four units

VA allows it with owner occupancy and zero down. FHA allows it with 3.5 percent down. Conventional requires more. At Michigan prices this is where the VA advantage compounds fastest.

Refinancing later

VA: the IRRRL streamline needs no appraisal and no income documentation in most cases. Conventional and FHA require a full refinance. See VA IRRRL.

Myth: Michigan replaced the veteran exemption with a capped credit

It did not. That 2022 law was tied to a bill that was vetoed and it never took effect. Michigan still exempts the qualifying veteran’s homestead in full, with no dollar cap.

Myth: You have to refile the exemption every year

Not since 2025. Once granted it continues without annual reapplication. You notify the assessor only if you stop qualifying.

Myth: A partial rating gets you a partial exemption

There is no partial version in Michigan. The property either qualifies for a full exemption or it does not qualify at all.

Myth: The exemption wipes out everything on the tax bill

Not quite. Special assessments for drains, roads, sewer, and street lighting generally survive it and still hit your escrow.

Myth: My taxes will be what the seller is paying

This is the big one. Taxable value uncaps the year after you buy and resets to half of market value. On a long-held home the jump can be substantial.

Myth: The principal residence exemption is automatic

It is not. You file an affidavit with your local assessor, and Michigan has deadlines. Miss it and you pay up to 18 mills of school operating tax you did not owe.

Myth: You can only use your VA loan once

Entitlement is reusable and restorable. Plenty of Michigan buyers we work with are on their second or third VA loan.

Is there a minimum credit score for a VA loan in Michigan?

No. VA publishes no minimum credit score. Lenders add their own, usually 620. The JD.Mortgage Team does not add one. If automated underwriting refers your file, we run a manual underwrite using the compensating factors VA recognizes: residual income, housing payment history, reserves, and documented explanations for past credit events.

Is there a VA loan limit in Michigan?

No, if you have full entitlement. Every Michigan county uses the 2026 national baseline of $832,750 for a one-unit property. Michigan has no high-cost conforming county. That figure only matters when you already have a VA loan open somewhere.

Do disabled veterans pay property tax in Michigan?

Qualifying veterans pay none on their homestead. Michigan exempts the property entirely, with no dollar cap. State guidance is explicit that a property either qualifies for a full exemption or does not qualify at all, so there is no partial version.

Who qualifies for the Michigan disabled veteran exemption?

Any one of three paths: a VA determination of permanent and total disability from military service with benefits at the 100 percent rate; a VA certificate for pecuniary assistance for specially adapted housing; or a VA rating of individually unemployable. Honorable discharge and Michigan residency are required.

Did Michigan replace the veteran exemption with a tax credit?

No. A 2022 law would have converted it to a capped income tax credit, but it was tie-barred to a separate bill that was vetoed and it never took effect. Michigan still has the full, uncapped property tax exemption. Outdated articles describing a capped credit are wrong.

Do I have to refile the Michigan exemption every year?

Not anymore. For taxes levied on or after January 1, 2025, once the exemption is granted it continues without annual reapplication. You must notify the assessor within 45 days if you stop qualifying.

Does the Michigan exemption cover special assessments?

Generally no. It exempts property taxes, but special assessments for drains, roads, sewer, and street lighting typically survive it. Those still appear in your escrow, so we account for them separately.

Can a surviving spouse keep the Michigan exemption?

Yes, if unremarried, and Michigan expanded it so the spouse can claim it on a home acquired after the veteran’s death. The limit is that the veteran must have received the qualifying VA determination while living. If the veteran never got the rating, the spouse cannot qualify.

What is taxable value uncapping in Michigan?

While you own a home, its taxable value can rise only by the lesser of five percent or the inflation multiplier, which is 2.7 percent for 2026. When the property transfers, that cap is removed and taxable value resets in the following calendar year to half of the home’s true cash value. On a long-held home the increase can be substantial.

Will my Michigan property taxes be the same as the seller’s?

Almost certainly not, and this is the most common escrow surprise in the state. You typically inherit the seller’s capped figure for the first year, then the uncapped number arrives the following year, often after your first escrow analysis. We underwrite against the reset rather than the seller’s bill.

What is the Michigan principal residence exemption?

It exempts your principal residence from up to 18 mills of local school operating tax. On a home with $150,000 of taxable value that is roughly $2,700 a year. It is not automatic. You file an affidavit with your local assessor by the applicable deadline, and second homes and rentals do not receive it.

Does Michigan tax military retirement pay?

No. Michigan does not tax military retirement pay. Active duty pay is also exempt. For 2026 the broader retirement income rollback is fully phased in, so other pension and retirement income is broadly deductible as well.

How long is the redemption period after a Michigan foreclosure?

It varies. For a residential property of four units or fewer where the amount claimed due exceeds roughly two thirds of the original debt, the redemption period is six months from the sale. In other cases it can run a full year. Abandoned property carries much shorter periods.

Can I buy a duplex or fourplex in Michigan with a VA loan?

Yes. VA allows two to four units as long as you occupy one, with zero down on full entitlement, and rental income from the other units can help you qualify. Michigan multi-unit prices sit far below the 2026 VA multi-unit limits.

Can a seller pay off my debt at closing on a Michigan VA loan?

Yes. VA allows a seller to pay off your credit cards, auto loan, or other debt as part of the 4 percent concession allowance, stacked on top of unlimited seller-paid closing costs. Retiring a high monthly payment lowers your debt-to-income ratio and can turn a denial into an approval on the same contract.

Can a seller pay to break my lease so I can buy now?

Yes. Paying an early lease termination penalty on a rental or on-post housing is an allowable VA seller concession. It is how a family stops paying rent and closes now instead of waiting for a lease to run out.

Do I pay the VA funding fee in Michigan?

The funding fee is federal and identical in every state. It is waived entirely if you receive VA disability compensation or hold a service-connected disability rating. Otherwise it is financed into the loan rather than paid in cash. If your rating was granted after you closed a prior VA loan, you may be owed a refund on a fee you already paid.

Get a Real Michigan VA Preapproval

Built on the uncapped tax estimate and your actual exemption status, so the payment still works in year two.