Obtaining a mortgage in another state is not always easy. When buying a home long distance, you face several disadvantages, including not knowing the neighborhoods or state laws. Depending on the circumstances surrounding your move, the lending guidelines may be stricter than if you were purchasing locally. Fortunately, there are steps you can take to make obtaining an out-of-state mortgage possible.
Your Reason Matters
When you apply for a mortgage in another state, the lender will consider the reason you want to buy the home. If your intent is to move into the home, your interest rate may be lower than the interest rate an investor can expect to pay. The lender may even require a higher down payment. According to Realtor.com, there is a greater default rate on investor loans than owner-occupied loans. To minimize the risk, banks may even turn down investors who want to buy out-of-state.
Stick to Local Agents and Brokers
Contact an agent in the area where you plan to buy. Ask locals for referrals and recommendations to help you find an experienced agent. Buying a home is hard enough without the added obstacle of being an out-of-state buyer. You want an agent who can help ease the process. Your agent can also refer you to a local mortgage broker. Although most lenders are national, a local broker is familiar with the lenders and knows their guidelines and requirements.
Because the lender will need to verify you make enough money to cover the mortgage, you will want to have job stability before you apply. Lenders like to see at least two years of employment within a particular career field to establish stability. If you pre-qualify for a loan while you are still employed at your current job, problems can arise if you switch jobs before the closing. If you are transferring, but staying with the same company, request a letter from the employer to submit to the mortgage company.
Create a Plan
Discuss your situation with your real estate agent and broker. You will need a plan before buying in another state. If you are picking up a vacation home, you will need to make sure you meet the income requirements necessary to support a second mortgage. Inform the broker if you know you will be unable to attend the closing in person. The broker can arrange for you to complete the paperwork via fax or mail.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.