It is definitely possible to buy a home in a different state but there are several points to keep in mind. The most important considerations are if the property is going to be your primary residence and your employment situation.
Buying a home in another state is easiest if you plan to live in the property and there are no significant interruptions or changes with your job. This usually means that you stay in your current job, transfer positions with your current employer or find a job with a new employer before your apply for the mortgage.
Having a job is important when you apply for a mortgage because lenders need to understand your income and type of employment to determine the loan you qualify for. Keep in mind that your job does not need to be located in the same state as the property you buy.
Additionally, if you plan to move into the property, you should qualify for a primary residence mortgage. Also, if you 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 loan.
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 investment property. You can qualify for the best mortgage terms, including the lowest interest rate, plus you are eligible for low down payment programs. A lower rate reduces your monthly payment and increases the loan amount you qualify for.
Qualifying for a mortgage to buy a home in another state is as simple as finding a lender licensed in that state. For a primary residence, you do not need to move to the new state before you apply for the mortgage as long as you plan to move into the property when your loan closes. For a second home, you do not need to move to the new state or occupy the property after closing but your mortgage terms are more expensive.
We recommend that you contact multiple lenders in the table below to confirm their loan terms and qualification guidelines. Shopping lenders is also the best way to save money on your mortgage.
In an ideal scenario, you do not need to change jobs or, if necessary, you find a new job in advance of moving. Please note that the lender verifies your employment when you apply for the loan and prior to closing so they can confirm your current job status and income.
We should highlight that you can still qualify for a mortgage even if there is a break in your employment when you move to different state. A relatively short break should not be an issue -- even if you change employers -- as long as you are employed when you submit your loan application and you can provide at least a month of pay stubs for your new job.
Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford
If the break in your employment is longer or if your type of employment changes significantly, you may be required to provide a letter of explanation to the lender or wait before you can qualify for a mortgage. For example, if you go from being a W-2 employee to self-employed or an independent contractor, you may need to wait one-to-two years before you can apply for a mortgage.
We should also emphasize that you do not need to live in a state on a full-time basis to qualify for a mortgage on a home in that state. If you do not plan to permanently occupy the property you buy and you only plan to live in it part of the year, the property is usually classified as a second or vacation home. The mortgage rate on a second home is usually moderately higher than the rate for a loan on your primary residence 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 occupy 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