How to Buy a House in North Dakota: 6 Steps

Buying a house is a major financial decision that involves weighing multiple factors. North Dakota's average home value is $265,896, much lower than the national average of $362,481. This difference makes homebuying more affordable in the state.

Understanding down payment assistance programs, mortgage types and state regulations can make homebuying smoother in the Peace Garden State. MoneyGeek offers tips to guide you, from saving for a down payment and picking the right location to finding the best loan for your needs and credit score.

Key Takeaways

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The average home value in North Dakota is $265,896, lower than the national average of $362,481, making it a more affordable option for homebuyers.

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To buy a home in North Dakota, find an ideal location, explore mortgage options, prepare the lenders' requirements and close the loan.

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The North Dakota Housing Finance Agency offers down payment assistance programs such as Start and DCA to help North Dakotans own a home faster.

Step 1: Prepare to Buy a House in North Dakota

North Dakota's homeowner vacancy rate in the second quarter of 2024 was 1.6%, according to the U.S. Census Bureau. This rate measures the percentage of vacant homes available for sale.

A rate of 1.6% indicates a high housing demand for limited inventory. Homebuyers may face increased competition when searching for a home. With fewer options, buyers may need to act quickly and be prepared to make competitive offers. A stable rate of around 2% offers buyers more choices and flexibility.

Review your financial and credit history before buying a home in the state. A solid financial profile can boost your chances of approval when applying for a mortgage.

Check Your Credit Score

Your credit score impacts the mortgage loans and interest rates you qualify for. A higher score improves your chances of getting a better rate. In the third quarter of 2023, North Dakota’s average credit score was 733, according to Experian.

If you have a bad credit score (below 580 on the FICO scale), you can still buy a house, but it may be harder to get mortgage approval. Check the table below for options based on minimum credit score requirements.

Mortgage Type
Description
Minimum Credit Score

Conventional Loan

Conventional loans are standard loans not insured by the government, typically offering competitive rates.

620

Jumbo Loan

Jumbo loans exceed conforming loan limits, making them suitable for high-value properties.

700

FHA Loan

FHA loans are for low-to-moderate income borrowers, often with lower down payment requirements.

500–580, depending on the down payment

VA Loan

VA loans offer veterans and active military members favorable terms and no down payment options.

None given, but may require at least 620

USDA Loan

USDA loans cater to rural property buyers, often with no down payment required.

580

Source: Experian

Review Your Debt-to-Income (DTI) Ratio

Your DTI ratio shows how much of your monthly income goes to debt payments, helping lenders decide how much mortgage debt you can handle. North Dakota's average mortgage debt was $192,535 in the third quarter of 2023, according to Experian, highlighting the added financial responsibility of owning a home in the state.

Monthly debt payments factored into your DTI include your mortgage, student loans, car loans, credit card payments and other debts. Use our debt-to-income ratio calculator below to find your front-end DTI (housing expenses) and back-end DTI (all debts). This tool also shows your total monthly debt payments.

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Debt-to-Income Ratio Calculator

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Determine How Much You Can Afford

Buying a house you can't afford can lead to financial strain. To avoid this pitfall, use the 28% rule, which suggests spending no more than 28% of your gross monthly income on your mortgage. This ensures you have enough funds for other expenses.

In April 2024, the median annual income in North Dakota was $48,830, according to the U.S. Bureau of Labor Statistics. That’s a gross monthly income of $4,069 before taxes. Applying the 28% rule, aim to spend no more than $1,139 monthly on your mortgage.

Use our mortgage calculator below to estimate your monthly payment in North Dakota.

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Updated: Dec 7, 2024

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BUDGET FOR ADDITIONAL HOMEOWNERSHIP COSTS

When buying a house, plan for more than just the mortgage payment. Property taxes and homeowners insurance can greatly impact your budget, and these costs vary by location and property value.

North Dakota residents pay a property tax rate of 0.98% on owner-occupied homes, according to Tax Foundation data. The average cost of homeowners insurance in North Dakota is $1,828 annually. Factor these costs into your budget to financially prepare for homeownership.

Step 2: Save for a Down Payment in North Dakota

A down payment is an upfront payment made when purchasing a house, typically 20% of the home's purchase price. This percentage is considered the standard, but it can be challenging for many homebuyers. For instance, with the average home value in North Dakota at $265,896, a 20% down payment would be $53,179. For homes above the average value, such as $295,000, the 20% down payment would rise to $59,000.

Fortunately, a 20% down payment isn't always required. For example, government-backed loans like VA and FHA require only 0% and 3.5% down payments, respectively.

If you put down less than 20%, your lender may require you to get private mortgage insurance. Use our PMI calculator to estimate your monthly PMI premium based on your credit score and down payment.

Private Mortgage Insurance Calculator

Calculate your monthly private mortgage insurance (PMI) premium in North Dakota based on your credit score and down payment.

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Explore Down Payment Assistance Programs

North Dakota offers several down payment assistance programs to make homeownership possible. They ease the transition from renting and owning a home by covering part of the initial costs. The North Dakota Housing Finance Agency (NDHFA) is a key provider of these programs.

See the table below for details on the state's down payment assistance programs.

Program
What It Offers

Start

This program provides low-income borrowers with 3% of the first mortgage loan amount as a credit. This credit can be applied towards your down payment, closing costs and prepaid items.

DCA

This program offers up to 3% of the mortgage amount for your down payment, closing costs and prepaid items. It cannot be used alongside other down payment assistance programs.

Step 3: Find the Right Location in North Dakota

Finding the right location in North Dakota involves evaluating various factors based on your lifestyle and financial situation. Examine the average house price in different areas and weigh this against your budget. Consider proximity to family, friends, work and school, as these connections can greatly influence your quality of life. Access to public transportation, parks, restaurants and shopping centers can also impact your decision.

The cost of living significantly affects your choice of a new home. According to the Missouri Economic Research and Information Center (MERIC), North Dakota's cost of living index for the first quarter of 2024 was 92.8, below the national average of 100. This lower cost of living might make North Dakota appealing to many.

Consider these expenses when evaluating potential locations:

  • Food
  • Health care
  • Clothing
  • Utilities
  • Education
  • Transportation
  • Entertainment

Check the table below for average home values in some North Dakota cities. You can also use our cost of living calculator to estimate expenses in different areas.

City
Average Home Value

Bismarck, ND

$353,253

Fargo, ND

$299,321

Grand Forks, ND

$267,622

Minot, ND

$254,365

West Fargo, ND

$332,369

Source: Zillow

Work With a Real Estate Agent

Working with a real estate agent can speed up your house hunt in North Dakota. They give advice, handle paperwork and offer an expanded list of property options you wouldn't access alone. Real estate agents can also recommend other service providers, like title companies and inspectors, to help you buy a home.

When finding a real estate agent, do your due diligence and interview those with experience in the neighborhoods you're interested in. Consider these tips:

  • Find someone who matches your needs and personality.
  • Verify the agent's credentials, training and license.
  • Ensure they have in-depth knowledge of the area.
  • Shop around for agents and compare their rates.

You can also use the North Dakota Real Estate Commission's license holder search tool to find or verify real estate agents in the state.

Step 4: Shop for the Best Financing Options in North Dakota

Finding the best mortgage you can afford is a critical step in homebuying. In North Dakota, options include conventional, jumbo, FHA, VA and USDA loans. You can choose from 10-year, 15-year, 20-year or 30-year terms and decide between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). Selecting the right financing option can increase your chances of approval and save you money over time.

Know the Current Mortgage Rates

Mortgage interest rates can change daily due to factors like the type of mortgage, the lender and the economy. While the interest rate is the percentage charged on the loan amount, the annual percentage rate (APR) reflects the actual cost of borrowing by including additional fees and costs associated with the loan.

As of December 2024, the APR for a 30-year fixed conforming loan in North Dakota is 6.41%, while the APR for a 30-year fixed rate FHA loan is 8.05%. Check the table below to see the current rates in the state by mortgage type.

Data filtered by:Results filtered by:
Loan Type:
Loan Type:30-Year Fixed
6.38%6.41%
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FHA LOAN VS. CONVENTIONAL LOAN

When shopping for a mortgage in North Dakota, you often have to choose between government and conventional mortgage programs. FHA loans are government-backed and typically have lower credit score requirements and down payment, while conventional loans aren't government-backed and often require higher credit scores.

Use our FHA loan vs. conventional loan calculator to compare these options. Enter details like your home price, down payment, term length, credit score and interest rate to find the loan that best fits your financial situation.

Get Pre-Approved

Getting pre-approved for a mortgage in North Dakota can simplify your homebuying process by clarifying how much you can borrow. This step shows sellers that you're a serious buyer. Lenders provide a pre-approval letter indicating the loan amount you qualify for based on your financial situation. This letter typically lasts 60 to 90 days, giving you time to search for a suitable home.

To get pre-approved, you need to submit several documents to your lender:

  • Proof of income, such as pay stubs and W-2 forms
  • Employment verification
  • Credit history report
  • Identification documents, like a driver's license
  • Bank statements

Understanding the difference between mortgage pre-approval and prequalification is essential. Pre-approval involves a thorough review of your financial situation, offering a more accurate estimate of the loan amount you can access. Prequalification provides a basic overview based on self-reported information, making it less reliable for negotiations.

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HOW TO CHOOSE THE RIGHT LENDER

Many lenders are in the market, each with different eligibility requirements, interest rates and fees. Thorough research is necessary to find the best fit. Banks often have a wide range of mortgage products and more resources but may impose stricter eligibility criteria. Credit unions may offer lower rates and fees, though they might have limited product offerings and require membership.

Consider these tips when choosing the right lender for your mortgage application:

  • Ensure the lender offers your preferred loan type. For example, if you need an FHA loan, verify that the lender is FHA-approved.
  • Compare the lender's sample rates with today's mortgage rates in North Dakota.
  • Understand the lender's underwriting process and see if you can complete a mortgage application online, by mail or in person.
  • Check reviews to evaluate the lender's customer service quality.

Step 5: Conduct a Home Inspection in North Dakota

Home inspections help identify potential issues not visible during a casual walk-through. Inspectors assess structural components, electrical systems, plumbing, roofing and HVAC systems. The resulting inspection report details the condition of these areas and highlights necessary repairs, offering buyers insight into the property's actual state.

An inspection might uncover major problems like a faulty foundation or outdated electrical wiring, which can lower the property's appraisal value. Such findings may lead buyers to rescind their offer, depending on the severity of the issues and the repair costs involved.

State-Specific Inspections

The North Dakota Secretary of State’s office regulates home inspections. Home inspectors must follow the state’s standards of practice, which include minimum requirements for a comprehensive inspection. These requirements cover examining the home’s structure, exterior, roofing, electrical, heating and air conditioning systems, plumbing and interior.

If you're looking for a home inspector in North Dakota, ensure they're licensed. Consider what other clients have said by checking online reviews and asking for references. You can also use North Dakota Secretary of State’s list of registered home inspectors to find or verify licensed inspectors.

Go Through Appraisal

Home appraisals provide an unbiased estimate of a property's market value, helping buyers and lenders ensure the agreed-upon price reflects the property's worth. The median appraisal cost was $500 in 2023, according to the 2023 Appraisal Survey from the National Association of Realtors (NAR).

Inspections and appraisals often occur during the homebuying process. An inspection evaluates the home's physical condition and identifies potential repairs or issues. An appraisal assesses the property's value, which lenders require to ensure the loan amount aligns with the home's worth. This helps protect the lender's investment by confirming the property can secure the mortgage.

Step 6: Close on Your House in North Dakota

Closing is the final step in buying a house in North Dakota, marking the ownership transfer when you receive the keys. Your lender must provide a closing disclosure document three days before the closing. This document details your loan terms, projected monthly payments and closing costs. Plan a final walk-through with your real estate agent near the closing day to ensure the property is in the expected condition.

Sign All Documents

During the closing day, you'll review and complete various paperwork to finalize your home purchase. Here are some documents you need to sign:

  • Final loan application: Confirms your mortgage terms, including the interest rate and payment schedule. It ensures that you and the lender agree before the loan is finalized.
  • Deed transfer: Transfers property ownership from the seller to you. It's recorded publicly to officially recognize you as the new owner.
  • Promissory mortgage note: A legal promise to repay the loan according to the agreed terms. It outlines the loan amount, interest rate and repayment schedule and is a binding agreement between you and the lender.
  • Homeowners insurance: Covers repair costs or replacement if your property is damaged. Homeowners insurance in North Dakota protects financially against natural disasters and provides liability coverage.
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HIRE A REAL ESTATE LAWYER

Hiring a real estate lawyer is common when buying a house. This attorney specializes in property law and assists with legal documentation, negotiations and ensuring compliance with local laws. They review contracts, identify potential legal issues and provide guidance throughout the transaction process. A lawyer can protect you from legal pitfalls and ensure a smooth transaction.

Typically, hiring a real estate lawyer costs between $700 and $1,250. The price varies depending on the complexity of the sale, location, property type and buyer needs.

Pay Closing Costs

Closing costs are fees required to finalize a real estate transaction. North Dakota's average closing costs are $3,219, according to NAR. These costs include:

  • Appraisal fee: Payment for a professional assessment of the property's value.
  • Title search and insurance fee: Costs associated with verifying the property's legal ownership and protecting against future claims.
  • Escrow deposit: Funds held in escrow by a third party to cover property taxes and insurance premiums.
  • Prepaid costs: Advance payments for items like homeowner's insurance and property taxes.
  • Other closing costs: Additional fees such as recording fees and attorney fees.

North Dakota Homebuying Details: What You Should Know

While we've covered basic homebuying steps, North Dakota has unique regulations and business practices. Understanding these details ensures a smoother transaction and helps you avoid potential pitfalls.

  1. 1
    North Dakota is a "caveat emptor" state

    North Dakota follows the caveat emptor (let the buyer beware) principle, meaning buyers must perform due diligence and inspections.

  2. 2
    Dual agency is permitted

    North Dakota allows dual agency, where a real estate agent or brokerage represents the buyer and the seller in a transaction. However, this is permitted only if both parties give their informed, written consent.

  3. 3
    A real estate attorney is required

    In North Dakota, a licensed real estate attorney is required to examine and certify the title.

Learning about the different first-time homebuyer programs in North Dakota can help you own a home faster.

FAQ About Buying a House in North Dakota

Buying a house is a long-term financial commitment. To help you start your homebuyer journey, we answered frequently asked questions about purchasing a home in North Dakota.

How much does it cost to buy a house in North Dakota?

What are the requirements to buy a house in North Dakota?

What credit score do I need to buy a house in North Dakota?

How much income do I need to buy a house in North Dakota?

Is buying a house in North Dakota a good idea?

About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.


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