Whether you’re relocating for a job or to live closer to family, buying a home in another state can be a lot to manage. But it’s feasible if you know what you're doing. While the process isn't that different from an in-state purchase, there are a few extra steps.
For example, comprehensive research into your target market is essential to ensure you make the right purchasing decision. A thorough home buying checklist can guide you through this process, especially if you’re buying a house out of state before you move. You'll also have to check mortgage requirements, calculate your budget with out-of-state moving costs, and consider what your property taxes will be.
Buying a house out of state: what you need to do
Buying a house out of state is a bit more involved than moving across town. These six steps can help you avoid some of the more common mistakes.
1. Research target markets.
The first and most important step in buying a house out of state involves researching target markets. You can simplify this step by identifying what you want most from the neighborhood and area you live in. For instance, if you have children, a high-quality school system is likely a must.
Some of the factors to consider when researching target markets include:
- Vicinity to shops and restaurants
- Crime rates
- Local amenities like healthcare and parks
- Cost of living
- Commute to work
- Housing costs
- Noise levels
The cost of living varies widely by state. It’s also generally lower in a small town than in a large city, so you might consider looking in the suburbs. Other expenses, like annual property taxes and homeowners insurance premiums, also differ in each state.
While you may not be able to choose which state you’re moving to, it’s important to budget for the additional costs (more below).
2. Check mortgage requirements.
Before you start looking for your dream home, check the mortgage requirements as well as the availability of different mortgages in the area you're moving to. Review your debt level, credit score, and credit history to make sure everything's in order. If you're applying for a conventional mortgage, you'll likely need a credit score of at least 620 as well as a debt-to-income ratio of 45%.
In comparison, the requirements for a USDA loan include a credit score of 640+ and a debt-to-income ratio of 41%. Keep in mind that USDA loans are designed to support low- and moderate-income buyers who want to purchase a property in an eligible rural location. They're available in all 50 states.
Those with lower credit scores, less savings, or other financial difficulties often turn to Federal Housing Administration (FHA) loans. These are also good for first-time homebuyers. But the loan limits vary by state, county, or metro area, so be sure to check with a local lender.sCAF
Once you find a mortgage type that interests you, get pre-approved by your preferred lender. While this isn’t mandatory, it’s helpful. Some realtors require a preapproval letter to show you homes. It also gives you a clear idea of how much you can borrow from a lender based on your financial situation, so you know your price range for a new home.
3. Estimate your total budget
When buying a house out of state, there’s more to consider than your home price. It’s essential to create a detailed budget accounting for all your expenses. Identifying these costs should help you limit unexpected expenditures.
- Property taxes. Each state has different property taxes, from 0.32% in Hawaii to 2.23% in New Jersey. Depending on where you live, the annual tax bill on a $500,000 home could range from $1,600 to $11,150. Your portion of the taxes for the year in which you buy the home will be due as part of the closing costs.
- Homeowners insurance. Homeowners insurance will also vary, with annual premiums ranging from $6,425 in Nebraska to $834 in Vermont. This expense is typically added to your monthly mortgage payment.
- Private mortgage insurance. If you put less than 20% down on your new home, you may have to pay private mortgage insurance (PMI)—about 0.46–1.5% of your loan amount monthly. This isn’t a permanent expense, though. Your lender will cancel it when you’re halfway through the loan term or the mortgage balance drops to 78% of your home’s original value.
- Moving expenses. The average cost of a long-distance move is $4,300, although that depends on the supplies you use, whether you hire movers, and other factors.[1] Also consider travel expenses, like hotel rooms, gasoline, or plane tickets. A moving cost calculator can help you estimate the expenses.[2]
4. Find the right real estate agent.
If you’re buying a house out of state before you move, it’s wise to find a real estate agent who's an expert in the specific areas you're targeting. They can line up tours of homes in your price range that offer the amenities you want and need. Their expertise will be especially helpful if you aren’t able to visit your new city and state very often before your move.
To ensure you hire the right real estate agent for the job, take the following steps:
- Compare realtors and agents online by reading reviews and identifying the number of homes sold.
- Conduct interviews with at least three agents to ensure they understand the area you're buying in.
- Ask how long the agent has worked in the industry and area.
- Make sure the agent primarily works with buyers.
- Ask the agent if you or the seller pays their fee.
- Mention any unique aspects of your situation to ensure the agent knows how to meet your specific needs.
- Ask the agent to provide you with several references you can contact.
Simplify your search by using an agent-matching service like Clever Real Estate, which connects buyers with low-commission real estate agents. You’ll receive options for pre-vetted, high-quality realtors in your new city and state who offer full services at a discounted rate (typically 1.5%).
Want an easier option? We recommend letting Clever Real Estate do the legwork for you. Clever vets thousands of agents based on performance nationwide so you can pick from the best of the best. Plus, you can qualify for cash back when you buy. Get matched with agents in the state you're moving to.
5. Visit the property in person at least once.
Before you make an offer on a home, it's a good idea to visit the property in person at least once. Taking a tour of the property beforehand lets you minimize the possibility of making a bad investment.
The ideal time for your in-person visit is during the mandatory inspection that lenders require before they finish underwriting the loan. The professional inspector can point out areas that require repairs and give their thoughts on the condition of the property.
This is especially important when buying a house out of state, as you may not have many chances to evaluate the home in person.
6. See if you can close remotely.
Closing on your new home remotely is a convenient option that lets both you and the seller finalize the sale quickly, without you having to travel just to sign paperwork. Most states allow remote closings but the specific requirements may vary. The only states that currently prohibit remote closings are:
- Alabama
- Connecticut
- Georgia
- Mississippi
- South Carolina
- South Dakota
During a remote closing, you can sign all documents electronically. This includes anything that needs to be notarized. Some companies in states that don't allow 100% remote closing can perform at least some of it online. For instance, you may be able to sign everything electronically except what must be notarized.
Once you've signed all the necessary closing documents, you'll receive the keys to your new home.
Bottom line: preparation is key
Buying a house out of state brings a few extra challenges—notably, the distance. Because you may not be able to visit your new city and state multiple times, you’ll need to do your research. An experienced real estate agent can answer all your questions about the area and help you find a home and neighborhood that meets your needs.