A Complete Guide To Buying a House in Montana

buying a house in Montana

Montana, also known as the treasure state, is noted for its abundance of untouched wilderness and wide-open landscapes. The average cost of a home in Montana is $463871, which is almost 20% more expensive than the national average. However, buying a house in Montana would be a great idea as its a terrific destination, a fresh start, and a great big sky due to its below-average cost of living.

Homes are a little high in demand since Montana is an excellent area to live. This indicates that the cost of real estate is steadily rising, thus it’s critical to move fast. For instance, homes in Bozeman list for $998,875 and sell in 65 days, which is 35 days quicker than the state average. As a result, you’ll need to act swiftly if you want to outperform the competition.

You’ll be better equipped to manage this challenging process as quickly and painlessly as possible if you are more knowledgeable about the house-purchasing process and current real estate trends in Montana.

Guide to buying a house in Montana

Prepare your finances.

You should assess your funds before moving forward. You must be absolutely clear about the type of home you can afford. You must compute your credit score and debt-to-income (DTI) ratio in order to determine that. You must also be aware of and evaluate the additional costs that go along with purchasing a home.
Grab your calculator and  determine what kind of Montana home you can afford. Whether you can buy a new construction house or would need to conduct repairs on an existing one would depend on your finances and budget. If you are a real estate investor looking to buy a house to fix and flip for profit, fix and flip lenders in Montana can give you the access to financing you need.

Verify your credit rating.

Checking your credit score is the first thing you must do. Mortgage lenders will primarily consider this when deciding how much money to lend you. You can acquire your credit score for free via a number of online resources, including Credit Karma.

Let’s discuss figures. Anything below 670 is typically seen as pretty weak, whereas a credit score between 670 and 739 is considered solid. You must have a credit score of at least 620 in order to be approved for a conventional mortgage loan when buying a property.

If you learn that your credit score is under 620, you might want to postpone buying a home until you’ve had some time to improve it. But buying a house with less-than-perfect credit isn’t always impossible. You have a few choices if you decide to carry on with the process anyhow. Those looking for housing can receive financial aid from the following organizations or programs:

  • Homebuyers with credit scores as low as 523 may occasionally qualify for mortgage loans from the Federal Housing Administration (FHA).
  • If at all possible, MoFi works to assist Montanans in obtaining a home loan with no down payment.
  • The Montana Homeownership Network offers statewide assistance with closing fees and down payments.

Determine your debt-to-income ratio (DTI).

The debt-to-income ratio, or DTI, calculation comes next. This figure contrasts your revenue and your outgoings. In essence, it reveals to potential lenders what portion of your monthly income is available for discretionary spending. To get your DTI, simply tally up all of your recurring monthly obligations and divide by your gross income before taxes. Your response will be a figure with a single decimal place. To convert a number into a percent, move the decimal point by two places (DTIs are described as percentages). A 0.25 response, for example, would indicate that your DTI was 25%.
When figuring out your DTI, don’t forget to take all of your regular monthly payments into account. This ought to contain:

  • current rent or mortgage payments
  • auto loans
  • payments for insurance
  • Paying with a credit card
  • repayment of student loans
  • Child support or alimony

You will have greater luck getting a mortgage if your DTI is lower. Your DTI should ideally be at or below 36%.
You will find it quite challenging to purchase a home in Montana if your DTI is over 50%. Reduce your monthly spending if you can. If not, you might have to put off making the purchase.

Calculate your down payment.

How much you have available for a down payment is one of the main determinants of the kind of home you can purchase. At least 20% of the total cost of the residence must be paid upfront by you. The down payment is this sum of money.

Your ability to make a down payment will have a significant impact on the kind of mortgage you are offered and the kind of home you can afford. There are a few options available to you if you are unable to put 20% down:

  • Use the FHA to submit a mortgage application. They will occasionally provide people mortgages with just 3.5% down.
  • Think about getting mortgage insurance. If you have mortgage insurance, some lenders could consider accepting a down payment of less than 20%.
  • Veterans and active-duty service members can also use the Veterans Administration (VA) to apply for a mortgage with a down payment as little as 0%.

Get ready for closing cost and other expenses

All the additional expenditures and fees you will have to pay before closing on a home are collectively referred to as closing costs.
Typically, closing costs for a house should range from 1 to 5 percent of its overall worth.
Generally, any or all of the following are included in closing costs:

  • Fee for credit reports
  • Cost of a home inspection
  • Home valuation fee
  • originating mortgage fee
  • the cost of mortgage insurance
  • habitational insurance
  • tax on real estate

Look for homeowner’s insurance

You will typically need to obtain homeowner’s insurance in order to qualify for a mortgage. You’ll probably need to maintain sufficient insurance on the property for the duration of the mortgage.

But that’s okay because maintaining house insurance is a wise decision. Large-scale damage to an uninsured home can be disastrous because residences are such significant assets.

Compared to the $1,477 national average, Montana’s average yearly cost of homeowner’s insurance is $1,770. However, not all insurance companies offer the same rates, so it’s crucial to research costs from at least three different companies before selecting one.

Key Learnings: Before you start looking for a home, it is imperative that you carefully assess your financial status. It is the most important and initial step. Before you do anything else, figure up your credit score, DTI, projected down payment, and potential closing expenses.

Financing options for buying a house in Montana

The sort of loan you choose to finance your investment could have an impact on your bottom line as a real estate investor because it could affect your interest rates, down payment, and loan length. Here are a few different real estate financing investing tactics.

Conventional loan. Banks or credit unions frequently offer this type of conventional financing. They have consistent interest rates, flexible down payment requirements, and criteria for average to good credit. Lenders will assess your assets, tax returns, cash reserves, debt, and other eligibility features to ensure you have enough money to repay the loan. You will either be accepted or rejected by the lender after they have assessed your financial status.

Hard money loans. hard money loans have less eligibility conditions than standard loans, thus they are more accessible. The future profit of the asset is used to guarantee the mortgage rather than a person’s own income or credit history. To cover the anticipated market value of the property, hard money lenders will contribute a sizeable chunk of the cash upfront. Such loans are of a brief duration, frequently not exceeding a year.

Pick the proper location

The average home worth in Montana right now is $456,588, but if it doesn’t exactly fit your budget, don’t be concerned. City to city and even neighborhood to neighborhood, home values vary greatly.

Observe past trends in home value as well. You can use this to estimate how much your home’s worth might increase in the coming years.

Make a list of location in Montana to see what fits your concern.. Your list’s items should be numbered according to their importance to you. This will assist you in maintaining your basic priorities when shopping.

Colstrip, Scobey, and Chester are some of the least expensive communities in Missouri to find a home if you’re on a budget. On the other hand, Whitefish, Bozeman, and Manhattan are slightly more expensive but provide some of the greatest living standards.

Start home search

The enjoyable aspect of buying a property in Montana is house hunting! You’ll have the opportunity to tour a range of residences and learn what you really desire in a home.

List the things you desire in a house in order of importance. The things that are most significant to you should be at the top of the list. This will enable you to distinguish between necessities and nice-to-haves.

Your realtor can assist you in determining whether your desires are practical given your financial situation and preferred communities or whether you need to change your criteria.

Look at the available housing market.

Your amount of alternatives can be significantly impacted by the timing of your Montana home search. For instance, June typically has the highest number of homes for sale in Montana. You can have more selections and a better chance of discovering your ideal house if you search during this time of year.

On the other side, there aren’t many options in Montana in December. In comparison to the peak season, there are historically 60.9% less properties for sale in Montana.

Get a mortgage preapproval.

To properly bargain costs while buying a home, you must first obtain preapproval for a mortgage. You can’t haggle if you don’t know how much you have to spend! If you do not have documentation of preapproval, the majority of sellers will not even agree to show you properties.
To ensure your mortgage preapproval, follow these steps:

  • Select a mortgage provider.
  • Give your Social Security Number to any prospective lenders.
  • Provide any necessary information, such as banking details, job history, a list of your property and assets, and any debts or other financial commitments.

The potential lender will perform a hard credit check on you when you apply for a mortgage to assess your creditworthiness. It’s crucial to be certain you are prepared to buy before completing your application because repeated hard checks can harm your credit score. The last thing you want to do is have to submit more than one!

Make an offer

once you find your perfect home in Montana, next you will have to make an offer. Your real estate broker can assist you in drafting a purchase offer that will give you the best chance of persuading the homeowner to sell to you.

There is currently a 95-day average stay in the market in Montana before a home is sold. All markets, however, are subject to seasonal fluctuations. Properties sell faster in the spring and summer because of the higher demand.

The housing market in Montana typically peaks in June, with the average home staying on the market for just 67 days during that month. To improve your chances of having an offer approved on a house during this time period, be ready to act swiftly.

Conversely, if you wait until February to purchase, you’ll have more time to compare prices and features. Homes in Montana often remain on the market for 35 days more than would be normal for the rest of the country.

Hard money lenders, like 14th Street Capital, offer longer-term loans designed for buyers who want to make a quick purchase. This can be a fantastic alternative for you, especially if you’re self-employed, have bad credit, a history of bankruptcies or foreclosures, or any other factors that might make it difficult for you to get finance from traditional sources.