Montana residents ready to buy their first home will find this guide useful to understanding the mortgage process in the Big Sky State, as well as locating financial assistance to cover down payments and closing costs.
Check Mortgage Rates in Montana
Montana mortgage rates vary on the length of the loan, such as 30 versus 15 years, as well as prevailing economic conditions and the credit scores of the individual applying for a home loan. Lenders post their daily rates online, although the rate a buyer receives in a loan quote could be higher based credit history and income.
Montana residents can check their credit histories once a year for free with the three major credit reporting companies: Experian, TransUnion and Equifax. Knowing credit scores in advance helps smart homebuyers get a handle on the best interest rate they're likely to receive from a lender. This will partially determine the size of a mortgage payment, as well as how much interest will be charged over the life of the loan. A lower interest rate can save thousands of dollars during a 30-year mortgage. Learn more about factors that drive mortgage rates.
Homebuying Help for First-Timers in Montana
The Montana Board of Housing helps bridge the affordability gap for first-time buyers by providing down payment assistance in varying amounts. NeighborWorks Montana also offers down payment help. The Federal Housing Administration provides government-secured loans to first-time homebuyers in Montana. Mortgage amounts vary from county-to-county. This MoneyGeek guide takes an in-depth look at the homebuying process in general.
Financial Assistance in Montana for First-Time Buyers
Before getting involved with a mortgage lender, check out these resources available to new homebuyers in Montana.
Find a Housing Counselor in Montana
Understanding Home Affordability in Montana
The median price for a Montana home climbed 96 percent over the last 20 years, while the state's per capita income increased by about 26 percent. Housing prices retreated significantly during the recession, but the gap between home values and income continues to be an obstacle for many Montanans trying to buy a house. Although housing prices have stalled in some Montana markets, so too have individual incomes in the state.
How Much Can You Borrow in Montana?
Loan limits are capped at different amounts in Montana counties. The ceiling on FHA government-backed loans is about $271,000 while conventional loan limits peak at $417,000. First-time buyers working with the FHA will face some limitations in housing inventory due to the maximum loan amounts offered by this government agency. The table below highlights lending limits by county and loan type in Montana.
Buying a Home in Montana: Experts Weigh In
Rosalie Kiernan has served as homeownership planner with NeighborWorks Montana since 2013.
Brendan Moles has served as the housing services coordinator for Homeword Missoula since 2010.
What's the biggest thing first-timers overlook when they're ready to buy a house?
Credit is a huge issue. A lot of people aren't aware that there are credit guidelines for homebuying. We run into this all the time. You want to know your credit score because it can really impact buying a house. Pull one of the credit reports from one of the bureaus, then get the second report from another bureau four months later and the third report from the third bureau four months after that. Then you're back to free reports again. Paying off a debt could take anywhere from a couple months to a year or more to reflect positively on a credit report.
Knowing your credit worthiness and understanding debt ratios. I would recommend that someone interested in buying a house have no more than a 41 percent total debt-to-income ratio. Debt includes the mortgage payment, auto loans, child support, any recurring financial obligation. Federal lending allows a ratio up to 43 percent, and that's probably okay, but I lean toward 41 percent.
What's the single greatest obstacle to home ownership right now in Montana?
The biggest challenge for people in Montana is income. They don't have the income to purchase a nice house. Most in their price range are fixer-uppers. Chances are, you'll get into a house that will require some work and that's going to take more mone
Education is important. Credit counseling and pre-purchase counseling. Also budgeting and understanding various loan scenarios. Some loan programs require a certificate of taking one of our classes, but really it's about preparation and learning the process. Getting a mortgage is very labor intensive.
What's a fast way to repair damaged credit so a new homebuyer can qualify for a mortgage?
There aren't any super-fast ways. You can get a secured credit card backed by your own money. Then use it once a month, pay it off every month, and after six months you might see an increase in your credit score but generally it takes a year.
How's the refinancing climate right now?
Refinancing opportunities have been good for quite some time but my recommendation depends on when you got into the market. You want to refinance to save on monthly costs and you do that when interest rates are at least one percent lower than your existing mortgage rate.
Don't Forget Montana Closing Costs
Closing costs on a Montana house are an unavoidable cost of doing business. The mortgage lender will charge an origination fee for creating the loan. Attorneys, if used, will collect a fee for their legal services. The same applies to home inspectors and appraisers, who determine the value of a house and the safety of the structure. Current Montana closing costs hover near $2,000 on a $200,000 mortgage, according to a survey by Bankrate.com, which places the state higher than average U.S. closing costs. More information on how lenders set closing costs and what you can expect can be found here.
Average Closing Costs in the Treasure State
Source: Bankrate's 2015 survey of closing costs.
Refinancing a Mortgage in Montana
Housing experts in Montana say refinancing conditions are favorable right now, affording homeowners the opportunity to cut their monthly mortgage payments, take out some equity to finance home repairs or pay down more expensive debt, and still save thousands of dollars over an existing mortgage at a higher interest rate. Rosalie Kiernan at NeighborWorks Montana says rates are the lowest in years. To really benefit from refinancing, the new loan should have an interest rate at least a percentage point lower than the existing mortgage. This MoneyGeek guide offers comprehensive general information on the refinancing process.
Other Mortgage and Housing Resources in Montana
Information and low-interest down payment loans from the Montana Board of Housing.
A listing of all assistance programs available through NeighborWorks Montana, an advocacy organization that create opportunities for families and individuals "to live in affordable homes in strong communities."
Resources for first-time homeowners available through the Montana Board of Housing.
Federal lending programs and information from HUD specific to the needs of Montana residents.
A rundown of FHA, USDA and VA zero down payment first time home buyer loan programs, down payment assistance and grants.
Statewide organization providing education, pre-purchase counseling, community resource referral, resource development, and homeownership advocacy services to help families with disabilities buy a house.
Videos and classes sponsored by the Rocky Mountain Development Council on preparing for home ownership.
Information on state law that allows Montana residents to set up special savings accounts for home ownership and received a tax deduction.
Information on how to save for a home and budget mortgage payments as well as other financial matters. Maintained by the Montana Human Resources Development Council.
Information and resources to delay and stop foreclosure, maintained by the Montana Department of Justice.
Information about housing discrimination on Montana and what to do if you've been subjected to discriminatory practices.