The average Montana home costs $464K, up nearly 18% from the previous year and more expensive than the average American home, which is worth $365K.
Additionally, Montana residents spend an average of $1,135 monthly on mortgage payments. Although price is important when buying a home, you also need to consider other factors, such as mortgage terms.
Understanding the homebuying process will help you complete the mortgage application, seal the deal and stay out of serious debt. MoneyGeek covers the fundamentals for Montana homebuyers in this guide.
In Montana, the cost of a home averages $464K, which is almost $100K higher than the national average.
Homebuyers must meet a lender’s required credit score, DTI (debt-to-income) ratio and income standards to obtain a mortgage. Additionally, lenders often require a down payment when you purchase a house.
Before submitting an offer and finalizing a home purchase, you must choose your ideal location, determine rates, obtain pre-approval and conduct a home inspection.
Choose an Ideal Location
Location is a critical aspect affecting the cost of a home in Montana. For instance, according to Zillow data for 2022, the median home price in Lewistown is $270K, significantly less than Denton’s average home price of $349K. However, finding the best place to buy a house in Montana depends on a range of factors in addition to price, including the cost of living, area amenities and neighborhood culture.
Consider contacting a real estate professional if you're seeking the best area in Montana to buy a home. Real estate agents can guide you through the process of becoming a homeowner.
Ask your family and friends to recommend real estate agents. Once you’ve narrowed your choices, ask for references from recent customers. In general, you want a real estate agent who:
- Knows the local housing market
- Has a history of being trustworthy
- Has a network of connections
- Conveys ideas clearly
Ultimately, your priorities will determine which real estate agent is best for you.
The cost of living can differ depending on where you reside in Montana. For instance, you will spend up to 2% more on essentials like rent, food and utilities in Missoula than in Bozeman.
When looking for the cheapest places to buy a house in Montana, remember that the cost of living in a given area will affect your budget. When picking the ideal location, take into account living expenses, such as:
Use MoneyGeek’s cost of living calculator to learn how the cost of living in Montana differs based on where you live.
Montana's cost of living is $1,668 per month, 1.16 times lower than the national average, making it a comparatively affordable state. Butte, Billings and Missoula are among the lowest-cost cities in the state, according to Livingcost.org.
City, suburban and rural living all have advantages and disadvantages. For instance, people who reside in suburban or non-metropolitan areas can own a home for less money but may have less access to facilities like hospitals, malls and other amenities.
Calculate Mortgage Rates
Mortgage rates vary by lender and type. The optimal mortgage choice for you will depend on your needs and profile because different mortgage options have different rates.
The loan amount you qualify for and its interest rate will depend on various personal factors, including your income, credit history and debt-to-income ratio. To find the best mortgage rates for your situation, shop around and compare lenders.
Homebuyers in Montana have access to various mortgage options. Different loan types have different terms, conditions, rates and restrictions.
Each lender will have different eligibility requirements. Check your employment history, credit score, DTI ratio and gross monthly income against lender requirements to find the best matches.
The average interest rates in Montana are listed below by mortgage type:
- Conventional home loans (30-Year Fixed Rate): 6.9%
- VA home loans (30-Year Fixed Rate): 6.4 %
- USDA home loans: 3.3%
- FHA home loans (30-Year Fixed Rate): 5.5%
The average APR can change based on the lender and your area, so keep that in mind.
You’ll need to determine how much of a mortgage you can afford before purchasing a property. Comparing rates will help you decide between traditional home loans and government-backed mortgages, provided you are eligible.
To better understand the different costs of your mortgage — such as the interest, principal, property taxes and other expenses — use MoneyGeek's mortgage calculator. Additionally, you can compare interest rates for conventional and FHA mortgages to see which is the best fit for your situation.
Once you receive estimates from lenders, evaluate the mortgage alternatives based on upfront fees, APR rates, limits and other factors. Pick the mortgage that best matches your requirements and financial situation.
Each lender has unique conditions, restrictions and requirements. When evaluating your mortgage application, mortgage lenders frequently consider the following aspects:
- Credit Score: Although not all kinds of loans require a credit score, lenders typically favor borrowers with at least fair credit standing.
- Gross income: Your ability to pay back the mortgage is typically reflected by your income.
- Down Payment: The amount you can pay as a down payment indicates to the lender whether or not you are a risky borrower.
- DTI Limits: Your DTI ratio reveals how much of your income goes to pay off debt.
Prepare Down Payment Requirements
Although most mortgage options typically require down payments of at least 20%, some only require 3.5%. You might even be eligible for a VA or USDA loan, which don’t require any down payment.
Your down payment may differ depending on the type of mortgage you choose. A 20% down payment is typical for a conventional loan. For qualifying USDA and VA borrowers, no down payment is required. Borrowers must put down a minimum of 3.5% on FHA loans.
Once you know which loans you are eligible for, you may calculate your down payment percentage. Know that the size of your down payment will impact your monthly expenses. Typically, a larger down payment translates to lower monthly payments and vice versa.
Most conventional home loans with less than 20% down require the borrower to purchase mortgage insurance or PMI. If the borrower fails to pay the loan, PMI safeguards the lender.
- Conventional loans: If the down payment is less than 20%, PMI is necessary. Rates vary based on down payment and credit score.
- FHA loans: Although PMI is not necessary, you will probably still have to pay an upfront mortgage insurance payment.
- VA loans: No PMI is necessary.
- USDA loans: PMI is not necessary, but you may need to pay a guarantee fee.
A 20% down payment can be difficult for many homebuyers to save. Fortunately, Montana offers several down payment assistance programs to help reduce the upfront cash homebuyers need to shell out. These include:
- Bond Advantage Down Payment Assistance Program: Available for up to 5% of the sales price or a maximum of $15,000 and can be used for a down payment and closing cost assistance.
- MBOH Plus 0% Deferred Down Payment Assistance Program: Places a second mortgage lien of up to $15,000 on the property.
- District VI Human Resources Development Council: Provides homeownership assistance in Golden Valley, Fergus, Judith Basin, Petroleum, Wheatland and Musselshell Counties.
You can look into other home aid loans if these don't suit your needs. For example, Montana offers supplementary programs for first-time home buyers.
Get Pre-Approved for a Mortgage
Get pre-approved for a mortgage before making plans to purchase a house in Montana. Many sellers require a mortgage pre-approval before they show you their property.
A pre-approval is an assurance from the lender that specifies the amount you are eligible to borrow. A pre-approval is different from a pre-qualification because the latter indicates your eligibility for a loan; it makes no commitment.
Lenders typically need your financial and personal details to verify your income, credit history and debt-to-income ratio. You may also be asked to submit extra supporting documentation to demonstrate your eligibility, depending on the type of mortgage.
In Montana, you typically need to submit the following to apply for a mortgage:
- Social Security number
- W-2 forms
- Photo ID
- Tax returns
- Bank account statements
- Pay stubs
- Investment statements
- Other mortgage statements
Find out what your lender requires so you can quickly acquire the necessary paperwork. If a document is unavailable, you can also ask about alternatives.
When preparing to purchase a home, being pre-approved for a mortgage is an important step. Pre-approval for a mortgage could take up to 10 days, though the length of time will depend on the lender. You will receive a letter outlining your borrowing capacity once you are pre-approved.
You should only request pre-approval when you are prepared to buy a property because pre-approval letters often have a validity of 60 to 90 days. If your pre-approval expires, you must file for a new one.
The lender’s pre-approval letter tells you how much money you can borrow. Additionally, it shows that you're a serious home buyer with the resources necessary to obtain a mortgage. There is no cap on the number of pre-approval letters you can seek, but lenders run hard credit checks that may lower your credit score.
Pre-approval letters frequently include the following details:
- Loan amount cap
- Interest rate
- Loan amount
- Loan period
- Monthly payment
A pre-approval letter's contents, however, differ depending on the lender. Although some lenders may utilize the data you provided, others might request additional documentation.
Remember, pre-approval letters are good for 60 to 90 days. Take advantage of this time to enhance your profile and consult with your lender about the terms that would be most beneficial to you.
Conduct a Home Inspection
Always opt for a home inspection before making a purchase. An inspection will reveal any significant flaws, such as potentially fatal safety hazards. In addition, home inspections can give the buyer negotiation power if the house needs repairs or other improvements. Some lenders will only finance your house once it has undergone a professional inspection.
Although it adds to the upfront cost, hiring a certified home inspector can help you save big in the long run. Ask your real estate agent, family and friends for recommendations.
According to the International Association of Certified Home Inspectors, typical home inspections include a written report outlining the status of the following:
- Foundation, basement and crawlspace
- Ventilation, insulation and the attic
- Windows, doors and interiors
Additionally, you can opt for specialized home inspections that look at a house's foundation, pest issues, mold and sewage system.
Montana does not require home inspections, but some counties or cities may insist you get the house inspected before you buy it. However, buyers should conduct inspections to ensure that the home has no life-threatening safety or structural issues. A professional inspector will help identify any problem areas and provide a detailed report.
The mortgage lender often conducts a house appraisal to confirm the property’s value before it funds the purchase. To assess the home's actual value, which may differ from the listing price, a professional appraiser completes an inspection of the property. An appraisal assists in preventing overborrowing, which can put the lender in danger of losing money if the borrower defaults.
Appraisers will consider market trends in addition to a home's qualities and take into account the pricing of comparable area properties.
Close Your Mortgage Loan
You can close your mortgage loan after carefully reading the lending policies. When buying a home, take into account the closing charges. Closing costs include the amounts you pay the lender for the credit report, the cost of the appraisal, the cost of document preparation and more. In addition, you might have to pay external parties for services like pest inspection, legal work and home appraisals.
Before signing any documents, review them thoroughly. You will typically need to sign the following:
- Final loan application: Verifies that the information on your original loan application is accurate. Inform the lender if your financial situation changes at any time.
- Property deed: Conveys ownership to the buyer and contains all relevant information about the property.
- Mortgage note: Legally obligates you to make mortgage payments and contains information about the principal loan amount, interest rate and other terms.
- Final disclosure: Outlines the conditions of your loan.
Pay attention to the fine print before you sign any documents to avoid overlooking crucial details that can end up costing you in the long run. If you come across any unfamiliar terms, speak with an expert or your lender.
Closing expenses typically range from 2–5% of the purchase cost, depending on your area, the lender and other factors. These expenses include:
- Origination fee: Varies based on the lender but is often a modest portion of the loan amount.
- Title search charges: Costs associated with the title search to confirm that the property truly belongs to you.
- Escrow: Funds for real estate taxes, homeowners insurance, mortgage insurance and yearly funding fees are kept in this account.
- Recording fee: Some government organizations impose a recording fee for documents that list a borrower's ownership stake in a property and any potential liens against it.
This is not a complete list since the exact closing costs will also depend on the lender, but it should provide a good idea of what to expect.
You’ll need to identify your ideal location, calculate mortgage rates and assemble the required paperwork before buying a home. Additionally, you’ll need a pre-approval letter and a home inspection before closing the loan.
Being a homeowner entails various responsibilities, including setting aside money for an emergency fund and budgeting for expenses related to cleaning, fixing and maintaining the home's mechanical and electrical systems. Paying a larger down payment is an excellent strategy to ensure a lower monthly rate.
Montana Homebuying Details
While Montana's median property prices are higher than the U.S. average, the cost of living in the state is lower. Homebuyers have access to conventional and government-backed mortgage options. In addition, Montana offers several down payment assistance programs to help those unable to pay closing expenses or make a down payment.
Residents of Montana whose gross family income does not surpass 150% of the area median income are eligible for assistance from the Montana Homeowner Assistance Fund. Furthermore, 60% of the funding must go toward helping Montanans whose gross household income is less than 100% of the area median income.
Borrowers qualified for Montana Housing financing through the Regular Bond Program may receive assistance with their down payment and closing fees through the Bond Advantage Down Payment Assistance Program (Bond Program). This program places a second mortgage lien of up to $15,000 on the house. The DPA loans are available in initial mortgage loans in collaboration with Montana Housing and only through participating lenders.
Frequently Asked Questions About Buying a Home in Montana
MoneyGeek answers questions about purchasing a house in Montana.
- International Association of Certified Home Inspectors. "Home Inspection Standards of Practice." Accessed October 21, 2022.
- Livingcost.org. "Cost of Living in Montana." Accessed October 21, 2022.
- Montana Department of Commerce. "Homeowner Assistance." Accessed May 1, 2023.
- Tax Foundation. "Taxes In Montana." Accessed October 21, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans in Montana." Accessed October 21, 2022.
- Zillow. "Compare Today's Mortgage Rates in Montana." Accessed October 21, 2022.
- Zillow. "Montana Home Values." Accessed October 21, 2022.