How To Buy A Home In Another State

Certified Mortgage Advisor
NMLS 1701021
Published 
August 21, 2019

Moving to another state and buying a house

Now let's talk about how do you buy a house in another state. So if you're looking to relocate from where you're at to another state, it can be a little bit overwhelming to begin the process of planning.

How are you going to buy a house?

So not only that, but you might also need to sell the house you're in. So we're going to talk about a couple of strategies to make that timeline easier for you. We'll lay it all out so you can feel comfortable with that move. I've done quite a few deals where we've had people from out of state moving in and they've all gone really smoothly. The key though is planning upfront. If you don't have a plan for this, you're going to get over it very quickly.

Job transition

So first of all, let's talk about the job transition. Let's talk about why you're moving because if you are moving, you're most likely going to need a mortgage, and when you're getting a mortgage of any type, no matter if you're in-state or out of state, lenders, wanting to make sure that you have consistent.

We need to be consistent

So they want to see that the income that you're making now is going to be the same. If you get a new job and they most likely want the same line of work as well, they just want to see the consistency that you're going to continue to make the same amount of money.

So first get a good grasp on the job transition that you're going to have. Maybe you're in a state right now and your company got relocated to another state and that's why you're moving. That's a great reason to move states. If you're changing into a completely different job, you might run into some more hurdles there.

Information that lenders need to know

Mainly what lenders are going to be looking out for is when are you going to start employment. So they first want to make sure that you have the income to make the payment on the house. Before you close on the loan, right? They want to make sure that if you're employed currently in a state over here, they don't want you to close on a house and then be unemployed. They need to make sure that you have a job lined up and ready to go.

So the best way that you can document this and prove this to a lender is with a job offer and a job offer is just that it's telling you somewhat you could expect from your position when you're going to start working. And a lender wants to make sure that the offer is very clear on the income that you'll be making when you'll start. And that there are no contingencies on you being able to maintain that employment.

Evaluate your job transition

So where you're at right now, figure out when is the new job going to start, or maybe you need to start the job search, find jobs and get them secured and an offer lined up before you start the moving process.

Something that you'll want to keep in mind is you want to be within the same line of work. And the reason you want to be in the same line of work is because of lenders. Wanting you to have consistency. They want to make sure that if you completely change your job field, it's a job that you'll be able to be consistent with. So when lenders see you move from doing carpentry to plumbing, they start to feel like we're not entirely sure that this is going to be consistent income in the future. So they want to see you move into the same line of work.

Be ready for possible reserve requirements

Something else that you'll have to keep in mind as well are some possible reserve requirements when you're looking to purchase a home. All reserves are your monthly housing expense multiplied times a certain amount of months. So for instance, let's say you have a job offer and that job offer is lined up so that in two months, you're going to start your new position.

So when you close on your home, your lender is going to want to make sure that you have two months or so worth of a housing payment in your bank account. After you close that way, they can make sure that you're going to have the funds to be able to close on that property before your job starts.

Always have an emergency fund

Another thing that you really want to keep in mind and this isn't required but is making sure you have a nice emergency fund and some extra money set aside just for unexpected expenses. While you're looking at homes, you might be flying or traveling to go see properties in that state. You might be spending some time.

Looking at different jobs or interviewing, you might come up with some expenses that you encounter during the process that is even more expensive than just an in-state move. And so be prepared for that plan for that. Try to set aside a nice little fund for you in the event that you have any extra expenses that come up during the process.

Talk to your lender and show your game plan

So after you've nailed down the details of your job transition. You want to talk with a lender and walk them through what you're thinking and then have them help you set up a good game plan as well. There's no point in you trying to hide the details of what you're going through.

If you lay out all the cards on the table show. Hey, this is what I'm expecting. This is what I'm wanting to do. They can help you set up a good game plan and discuss with you exactly what the lender's going to need to make sure that everything's going to move really smoothly.

Game plan should be your first step

And you want to make sure that you do this in advance before you start anything in motion. That way you have a really solid plan that way, on this date, this is exactly what I need. So that this happens. That is the plan that helps you not have stress during your move.

Timing

So when you're moving from out of state, timing becomes a huge factor in what you're doing. If you're renting right now and then purchasing in another state timing, isn't as big of a deal because lease contracts either you might have to continue paying it, or you can get out of it by pre. But normally leases, aren't crazy to get out of it. It might be a couple of months extra that you have to pay, but it's not like you have to go try to sell something. If you're currently in a home and then wanting to buy another property, that's where timing is going to be a little bit tricky.

Contingency

So the first thing that you want to look into is what's called contingency. Contingency is basically saying, do I have to sell my house? And then buy or can I buy a home and make two mortgage payments at the same time?

So that again, contingency is just saying, do I have to sell my house and then purchase? Or can I purchase and then sell my house and contingency is going to dictate a lot of your timing. What a lender is figuring out here and if you have to write a contingent offer or not is, can you hold two mortgage payments in your debt-to-income ratio?

Contingent offer

Frankly, a lot of people can't, if you have a low amount of debt or a higher amount of income, then you probably can hold two mortgage payments. And that's the easiest is to write a non-contingent offer. But for a lot of people, it's difficult to make two mortgage payments and that's perfectly okay. But it's something you have to keep in mind is you're going to be writing a contingent offer, which means when you go to write an offer for the purchase, you're going to tell the seller, Hey, we can purchase this, but we have to sell our house first. That's a contingent offer.

Non-contingent offer

A non-contingent offer is you go to the seller and say, Hey, we want to purchase this home. We don't have to sell this house. We're ready to move on this as soon as possible. So if you have a non-contingent offer, this is the easiest method to go through, because what most likely is going to happen is you're going to work on selling your house in the state that you are in, but then you're able to close on the purchase without having to sell your house first. And that makes the move as easy as possible because you probably have freed up funds and you're ready to make that move. Whenever you have your job lined up and ready to go.

Buying and selling your house

However, most people they're going to be writing a contingent offer, which means they need to sell their house first and then purchase a new one. And so this is something that everyone needs to be aware of and you want to make some extra time available in the whole transition that way in case there are any hiccups over here on the sale that it's not going to interfere fear with the buying process too much.

So normally what you'll want to do is you'll want to be looking for a house and looking to sell your house at the same time. So maybe over here in your sale, you go ahead and start talking with a realtor and put your house on the market, and then on your purchase, you're going to start looking for homes and you'll write contingent offers. And so in that timing process, what gets a little tricky is when you're selling your house first, you'll sell here.

You need to have a little bit of a gap

So a couple of days before you purchase. And the reason why you need a couple of days here is that when you sell your house, you're going to get a check. So that money needs to be deposited into your account, or it needs to be wired to a title company. Then, you also need a little bit of time for your new lender to be able to get everything worked out and all the documents.

No need for two mortgage payments

For that new purchase, contingent offers can be a little bit tricky, but the nice thing about them is that number one, you don't have to have two mortgage payments at the same time, which is I'm sure a nice relief.

Equity transfer

Then number two is that you can transfer the equity from the sale right over to the purchase. For a lot of people, what I help them do when I want to look over the mortgage application and see maybe they have some credit card debt is I suggest looking at the possibility of taking the funds from the sale, and paying it off. And then putting the rest on the equity of the new home. So after you figured out your job transition, what that's going to look like. You have a job offer lined up, you've talked with a lender and got a really good game plan together.

You've figured out if you have a contingency or not, and you've mapped out a timeline and hint a good way to do this is to have your lender go through with the sample dates on Monday, this is going to happen on Wednesday. We expect this to happen on Friday. We expect this to happen. That's going to be a good way to help you plan everything. So after you've got that all lined up, you're ready to start putting things in motion because you have a good plan.

What should we expect from a realtor?

But I wanted to touch on really quickly what to expect from a realtor during this process. Obviously, I work on the lending side. I specialize more in helping people coordinate their financing when they're moving from out of state. But when you're looking to buy a home out of state, it's difficult because you're not physically there. So you can't tour the home. You might be traveling to go see a couple of homes every once in a while, which people can do, but that's just a lot of added expense as well.

So some things that you want to be looking out for in a realtor when you're searching for a home out of state is number one, do they have experience with relocation. There are a lot of realtors who will put in the description, experience with relocations. You can put anything in your description.

So don't trust all that interview. Some agents see some experiences that they've had in the past with relocations and see if they can give you some ideas or tips, ask them for some experiences that they've had with relocations. What are some struggles that they've found with relocations? What are some wins that they've had with three locations?

You want to get this, not to judge the realtor because a lot of things are out of their control, but you want to get this information to see things that you can avoid in the future or things that you can do to make it easier in the future for you. To find an agent with experience.

Look for someone who is tech savvy

Also, you want to find an agent who is a little bit more tech-savvy. The reason why is because there are a lot of agents who are incredible at accommodating out-of-state buyers and what they'll do. Some of the good ones will be able to do like a video walkthrough with you. So I've seen some agents they'll do like a FaceTime or a live video call and they'll walk around the house.

Sometimes that can be really great. There's an agent in our office, and what he does is he'll just do a prerecorded video who walked through the house and talk about the house a little bit, and then he'll go and throw it up on YouTube so that his clients can go look at a whole playlist of some properties that they were interested in and have a little video.

Take advantage of technology, communicate with your agent

Something else that you could do is Skype or FaceTime with your agent. And that way you can have that instead of just a phone call or email, you have a little bit more face-to-face interaction. And that's something that I do with my clients as well as I send them personalized videos.

If they want to hop on a FaceTime call, we can do that too. Really, if you're moving from out of state, the whole key is it really, isn't overwhelming. If you get a step-by-step plan and action and be prepared to deviate from that plan and have a backup idea of what you need to do next if anything happens.

The best people to help you out

Number one is a mortgage advisor and two is a realtor as well, there'll be able to help you get a good game plan set up. That way everyone's on the same page and what's going to happen before you make the transition.

Talk with a loan officer
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