It is definitely possible to buy a home in one state while you are living in another state but there are several points to keep in mind. The most important considerations are if you plan to move to the state where the property is located and if the property is going to be your primary residence or your second home.
If you plan to move to the new state and occupy the property as your primary residence it is best if you have your new job lined up before you apply for the mortgage. This can be accomplished through a job transfer with your current employer or by finding a new position in the new state.
Landing a job is important because lenders want you to be employed when you apply for a mortgage. They need to understand your income and type of employment to determine the mortgage you qualify for.
Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford
Lenders also want to understand if there is going to be a break in your employment when you move to the new state. Depending on the length of any potential employment gap and other circumstances, you may be required to provide a letter of explanation to the lender.
Ideally, your current job allows you to transfer from one state to another without a significant break or you find a new job in advance of moving. If you can provide the lender documents that verify your employment in the new state you should should be in a much better position to get approved for a mortgage.
Because you will be employed in your new state, you should also be able to qualify for a primary residence mortgage. Additionally, if you plan to sell or move out of your current home, the lender only includes the housing expense -- mortgage payment, property tax and homeowners insurance -- for your new home in your debt-to-income ratio which makes it easier to get approved for the mortgage. It is a lot easier to qualify for one mortgage than two.
Applying for a mortgage on your primary residence also means your mortgage rate is lower plus you are eligible for low down payment programs. A lower mortgage rate reduces your monthly payment and increases the loan amount you qualify for so there are multiple benefits to getting a mortgage on your primary residence as compared to a different property designation such as a second home or non-owner occupied property.
The table below shows mortgage rates and fees for leading lenders. We recommend that you shop multiple lenders to learn more about qualification requirements and to find the best mortgage terms.
If you do not plan to permanently move to the other state or get a job in the new state, the property is likely classified as a second or vacation home. The mortgage rate on a second home is usually moderately higher than the rate on the home you live in and the qualification requirements are different.
You are usually required to make a higher down payment to qualify for a mortgage on a second home and the minimum credit score requirement may be higher as well. Second homes are also ineligible for most low down payment mortgage programs.
Additionally, you need to make enough money to afford the mortgage and other housing expenses on the second home plus the mortgage or rent on your primary residence. In short, you need to afford the total monthly housing expense for two homes instead of one, which makes qualifying for the mortgage much more challenging.
In closing, it is definitely possible to buy a home in a state you do not currently live in. Your mortgage terms depend on how you intend to use the property, your employment situation and where you plan to live on a permanent basis.
"Standard Eligibility Requirements: Second Homes." Eligibility Matrix. Fannie Mae, October 2 2019. Web.« Return to Q&A Home About the author