The median price of a home in Alaska is roughly $332K. This is a year-over-year increase of 9.8%. Although the average cost of properties in Alaska has been steadily increasing over the years, it is still lower than the national average of $356K.
Growth in median home prices in Alaska is also slower than the national average, which was 16.5% over the past year, compared to Alaska’s 9.8% increase over the same period.
If you are a first-time homebuyer wondering how to buy a house in Alaska, MoneyGeek broke down the steps to help you navigate and manage the process without falling into crippling debt. Our analysis includes understanding mortgage rates, choosing the best location and the importance of home inspection.
The average cost of homes in Alaska is $332,157, slightly lower than the national average.
Homebuyers generally need a down payment of 20% to get a mortgage in Alaska, but there are also low-down-payment and zero-down-payment options available.
To buy a home in Alaska, you need to identify the best location, calculate rates, get pre-approved and conduct a home inspection before making an offer and closing the sale.
Choose an Ideal Location
Location is one of the main factors that will determine how much it costs to buy a house in Alaska. For instance, based on 2022 data, the median home price in Anchorage is $420,993, compared to an average of $183,928 in Fairbanks.
However, besides cost, other factors like access to amenities, neighborhood culture and cost of living are also important when deciding the best place to buy a house in Alaska.
If you are looking to buy a home in Alaska, a real estate agent can help you find the best home based on your budget and unique needs. The agent will guide you through the entire process, including finding appropriate homes, setting up tours and negotiating with the seller.
Buying a home is a major financial investment, so the right real estate agent will not only help you find the best home but also ensure you do not make costly mistakes. MoneyGeek recommends using the following tips when looking for an agent.
- Ask for reputable agent referrals from people you trust
- Verify the agent’s licensing, experience and training
- Check references
- Ensure that they have in-depth local knowledge of the area
- Check and compare rates to ensure they are reasonable
In Alaska, the cost of living can vary widely depending on where you live. For instance, you will spend up to 12% more of your income on necessities like housing, food and utilities in Juneau than you would in Anchorage.
If you are looking for the cheapest places to buy a house in Alaska, keep in mind that the cost of living in a particular area will also factor into your expenses.
Some of the living expenses you need to consider when choosing the right location include:
You can find out how the cost of living in different Alaska cities varies using MoneyGeek’s cost of living calculator.
Alaska is one of the most expensive places to live in the U.S., with a cost-of-living index of 126.7 compared to the national average of 100. However, you can still save on expenses by choosing a home in a more affordable area.
Suburbs tend to be more affordable to live in, but the tradeoff is limited access to social amenities such as hospitals, schools and malls. Cities tend to be more expensive but offer great access to social amenities.
In Alaska cities like Anchorage and Juneau, where median house prices are high, the cost of living is lower than in cities like Fairbanks. This means it’s important to look for a balance between property prices and the cost of living before you choose a location.
Calculate Mortgage Rates
When looking to buy a home in Alaska, it is important to understand the mortgage rates available to you. Different mortgage options have various rates, and the best for you will depend on your profile and needs.
Keep in mind that individual factors like your income, credit history and debt-to-income ratio will play a role in the size of the mortgage you qualify for and its interest rates. Comparing lenders is also key in helping you find the best mortgage rates for your profile.
Mortgage rates can vary depending on the type of home loan that you choose. For instance, VA home loans typically have lower interest rates than conventional loans, but you have to meet the eligibility criteria.
Rates will also vary depending on the lender and profile factors like your credit score, income and debt-to-income ratio.
The average interest rates in Alaska for different types of mortgages are:
- Conventional home loans: 6.81 %
- VA home loans: 6.06 %
- USDA home loans: 3.50%
- FHA home loans: 7.05 %
Keep in mind that average APR rates can vary depending on the lender and your location.
Before buying a home, it is important to first figure out if you can afford the mortgage payments. You may qualify for both conventional home loans and government-backed mortgages, so comparing rates will help you choose the best option.
A mortgage calculator will help you understand the different costs of your mortgage, including the principal, interest, property taxes and other costs. You can use MoneyGeek’s mortgage calculator to get an estimate of your mortgage payments. You can also compare rates between conventional and FHA home loans to find the best option for your profile.
Once you get an estimate, you can compare mortgage options based on upfront costs, APR rates, limits and other variables to find a mortgage that best suits your needs and budget.
Your financial profile will be a significant factor in the mortgage rates and terms available to you. Factors like APR rates and the loan amount will depend on how creditworthy you are. Some of the factors mortgage lenders will consider include:
- Credit score: Buyers with a good credit score can get better APR rates and higher loan amounts than those with poor credit.
- Income: Mortgage lenders will look at your income to assess your creditworthiness. Some lenders may have a minimum income requirement.
- Debt-to-income ratio (DTI): This indicates the percentage of your income that goes to existing debts. Lenders consider your debt-to-income ratio as an indicator of your ability to repay your loan. Some lenders will specify a DTI that you need to meet to be approved.
- Down payment: Buyers with higher down payments will typically get better APR rates and lower monthly mortgage payments.
Prepare Down Payment Requirements
There are different down payment requirements depending on the type of mortgage you get. Some mortgage options require low down payments of 3.5%, while others typically have down payments of at least 20%. You may even qualify for a home loan that does not require a down payment, such as a VA or USDA home loan.
When buying a home, one of the major costs you will incur upfront is the down payment. For conventional loans, lenders typically prefer that buyers have a deposit of at least 20%. However, there are low-down-payment mortgages where you can get a loan with a down payment of just 3.5%. VA loans and USDA home loans are zero-down-payment options.
Note that for zero-down-payment mortgages, you need to meet certain criteria to qualify. For instance, USDA home loans do not require a down payment, but only those buying homes in eligible rural areas can qualify.
Keep in mind that your down payment will impact your interest rates and monthly payments. Higher down payments usually mean lower interest rates and monthly payments.
Most conventional home loans with less than 20% down require buyers to purchase private mortgage insurance (PMI). PMI protects the lender in case the borrower defaults on their loan. However, not all mortgage options require mortgage insurance.
- Conventional loans: PMI is required if the down payment is less than 20%. Rates vary depending on credit score and down payment amount.
- FHA loans: PMI is not required, but you will likely need to pay an upfront mortgage insurance premium (MIP) instead.
- VA loans: No PMI required.
- USDA loans: No PMI required (may need to pay a guarantee fee).
If you have not owned a home in the past three years, you may be eligible for Alaska’s down payment assistance programs. These programs assist first-time buyers in Alaska who may not be able to make a sufficient down payment when applying for a home loan.
Some of the down payment assistance programs available in Alaska include:
- AHELP: The Affordable Housing Enhanced Loan program (AHELP) partners with other agencies to help low- to middle-income borrowers meet the cost of a down payment. Borrowers who qualify receive assistance in the form of grants or forgivable loans.
- Closing Cost Assistance: The Closing Cost Assistance program is funded by Alaska Housing to provide home buyers in Alaska with 3% or 4% of the loan amount, depending on their creditworthiness.
Get Pre-Approved for a Mortgage
When planning to buy a home in Alaska, it is important to get pre-approved for a mortgage first. Keep in mind that some sellers will require a mortgage pre-approval before showing you their property.
A pre-approval is a commitment from the lender stating the specific loan amount you can borrow. A pre-approval is different from a prequalification since the prequalification only shows that you qualify for a loan — it is not a commitment.
Mortgage lenders will generally require at least your personal and financial information. These documents will be used to verify your income, credit history and debt-to-income ratio. Depending on the type of mortgage, you may also be required to provide additional supporting documents to show that you are eligible.
You can expect the lender to request the following documents:
- Driver's license
- Social Security card
- Current pay stubs
- Three years tax returns with W2s
- Bank account statements
- List of credit cards and debts
Other documents may also be required depending on your status. For instance, if you are self-employed, you will need to provide year-to-date profit and loss statements and statements of unpaid accounts receivable.
Getting pre-approved for a mortgage is a key step when planning to buy a home. It may take up to 10 days for you to get pre-approved for a mortgage, but this timeframe may vary depending on the lender.
Once you are pre-approved, you will get a pre-approval letter showing you how much you are eligible to borrow. In most cases, pre-approval letters are only valid for 30 to 90 days, so you should only apply for pre-approval when you are ready to buy a home.
After the stipulated timeframe, the pre-approval letter will expire and will no longer be valid. Once your pre-approval letter has expired, you will need to apply for a new one.
When you submit an application to a mortgage lender, they will review it and perform a credit check to assess your eligibility. If you qualify for a loan, the lender will issue you a pre-approval letter. The pre-approval letter indicates that the lender is willing to give you a loan of a specified amount.
You can get pre-approval letters from different lenders. This will allow you to compare offers and rates. However, each lender will have a specific validity period for their pre-approval — typically between 30 and 90 days.
There is no limit to the number of pre-approvals you can get. However, lenders conduct hard credit checks when you apply for pre-approval, which may impact your credit score negatively.
Conduct a Home Inspection
Before buying a home, it is crucial to have a home inspection done. A thorough inspection will uncover any significant problems with the home and help you avoid life-threatening safety issues. Home inspections can also give the buyer leverage when negotiating if the home requires repairs or other upgrades. Some lenders will also not finance your home unless you have a professional home inspection.
When looking for a home inspector in Alaska, it is important to ensure that they are licensed by the state. Working with a professional and reputable inspector will also ensure that you get an accurate and detailed report, which will guide you on whether to proceed with the purchase.
To rule out any life-threatening safety issues, construction flaws or significant damage, you should have a home inspection checklist that covers the following areas:
- Windows and doors
- Surrounding grounds
- Attic and basement
- Heating and cooling systems
- Plumbing system
- Electrical system
- Major appliances
Alaska state laws require sellers to disclose any defects or faults before transferring property. However, buyers need to conduct their own inspections to ensure that the home does not have any life-threatening safety issues or flaws in the structure. A professional inspector will help to inspect any areas of damage in the home and provide a detailed report to help the buyer make an informed choice.
All home inspectors are required to be licensed by the state. Keep in mind that individual localities and counties may have their own inspection laws. Check with your real estate agent for any specific inspection regulations that apply to your particular area.
A home appraisal is typically carried out by the mortgage lender to verify the value of the property before they can finance the purchase. An appraisal involves a thorough inspection of the home by a professional appraiser to determine the actual value of the home, which can be different from the listing price. The appraisal helps to ensure that the home buyer is not overborrowing, which would pose a risk to the lender if the borrower defaults.
Apart from the inspection of the actual features of the home, appraisal values are also impacted by current market trends. This means that the appraiser will also consider recent current market rates of similar properties during the appraisal.
Close Your Mortgage Loan
After the home inspection and appraisal, you can review the lender’s loan offer and proceed to the closing process. It is important to note that there are costs involved in the closing process. However, for those with limited funds, down payment assistance programs in Alaska can help to cover some of the closing costs.
Once you have reviewed the terms of the loan and accepted them, you will be required to sign the following documents. Review all documents carefully before you sign them.
- Final loan application: You will need to sign your original loan application to confirm that your information is correct. Any change in your financial status should be disclosed to the lender.
- Mortgage note: This legally binds you to pay the mortgage and includes the mortgage amount, interest, payment dates and terms.
- Property deed: This document details everything about the property and transfers ownership to the buyer.
- Closing disclosure: This disclosure spells out the terms of your loan. The law requires the lender to give you the closing disclosure at least three business days before you close on the mortgage.
In most cases, closing costs range between 2% and 5% of the total purchase price, depending on your location, lender and other factors. These costs include:
- Origination fee: Some lenders charge an origination fee for their services. This fee is usually a small percentage of the loan amount but can vary depending on the lender.
- Escrow: This account includes money for property tax, homeowners insurance, mortgage insurance and annual funding fees.
- Title search charges: You need to pay for the costs of the title search, which ensures that the property is rightfully in your name.
- Lender fees: You will need to cover the lender’s fees, including appraisal costs.
- Third-party fees: As the buyer, you will also incur other third-party costs, including inspection fees, attorney fees, homeowners association transfer fees and any other fees applicable depending on your situation.
Buying a home in Alaska can be overwhelming, but following a step-by-step process can help you complete your homeownership journey successfully.
Once you have chosen the best place to buy a home in Alaska, following the steps outlined in this guide will help you finalize the purchase seamlessly. You can always consult your realtor if you need guidance along the way.
Once you receive your mortgage, check your documentation to verify when your first payment is due. It is best to set up automatic payments for your mortgage payments to avoid missing payment dates. You can also set up reminders when your payments are due.
Alaska Homebuying Details
When planning to buy a home in Alaska, it's important to understand that while median house prices are lower than the national average, the cost of living can be quite high. It is also crucial to keep in mind that access to some parts of Alaska by road is limited, so you need to make sure you choose an area that has access to the amenities you need.
Homebuyers in Alaska can access both conventional and government-backed mortgage options. For those who are not able to afford a down payment or closing costs, Alaska has various down payment assistance programs that can help.
The Interest Rate Reduction for Low-Income Borrowers (IRRLIB) program offers subsidized interest rates to economically disadvantaged borrowers. However, to qualify, borrowers are required to take an approved homebuyer education class.
Alaska Housing also has an Energy Efficiency Rate Reduction program — if you buy a home that meets certain energy efficiency standards, you will get an interest rate reduction.
Veterans who want to buy homes and meet certain income limits can also get a 1% interest rate reduction on the first $50,000 of the loan amount.
Frequently Asked Questions About Buying a Home in Alaska
MoneyGeek answered commonly asked questions to help you learn more about how to buy a home in Alaska.
- Alaska Housing Finance Corporation. "Affordable Housing Enhanced." Accessed September 29, 2022.
- Alaska Housing Finance Corporation. "Down Payment Assistance." Accessed September 29, 2022.
- Alaska Housing Finance Corporation. "Loan Options." Accessed September 29, 2022.
- Alaska.gov. "Alaska Tax Facts." Accessed September 29, 2022.
- Consumerfinance.gov. "What Is a Closing Disclosure?." Accessed September 29, 2022.
- USDA. "Is Mortgage Insurance Required for a Rural Housing Service Single-Family Loan?." Accessed September 29, 2022.
- Zillow.com. "Alaska Home Values." Accessed September 29, 2022.
- Zillow.com. "Compare Today’s Mortgage Rates in Alaska." Accessed September 29, 2022.