Buying a house in Connecticut: A how-to
Connecticut is a pretty small state, but buying a house here offers a big range of lifestyle choices. There’s close-to-Manhattan commutability in southern areas like Greenwich and Stamford; beautiful beaches along the Long Island Sound in towns like Mystic and Madison; and rural New England charm in spots like Willington and Mansfield.
No matter where in the state feels like home to you, though, making it home will require speed. The median time on market for Connecticut homes during the second quarter of 2022 was just 11 days, according to data from Berkshire Hathaway New England. There simply aren’t enough homes available for the number of people who want to call the Constitution State home.
As mortgage rates rise and worries over inflation dominate the headlines, you might be asking yourself whether you should buy a house now or wait. However, if you have good credit and you’re planning to be in Connecticut for the long haul, buying now is probably a wise decision. Signs point to even bigger increases coming, based on the Federal Reserve’s mission to fight inflation. So, if you can lock in a rate now, you’ll avoid the possibility of paying even more interest later. Read on for everything you need to know about buying a house in Connecticut.
How to buy a house in Connecticut
Decide where in Connecticut to live
As you consider places to call home in Connecticut, it’s important to understand that “affordability” has a different meaning around the state. While single-family homes in Fairfield County — which includes pricey cities like Greenwich — sold for a median price of just under $770,000 in the second quarter of 2022, condos and townhomes in northern Tolland County ran just $165,000.
Your mortgage payment isn’t the only thing to budget for in Connecticut, though. Think about all the other items on your spending list, including transportation, utilities, food and more. Bankrate’s cost of living calculator is a good place to start. For example, if you live in New Haven (home of the esteemed Yale University), your cost of living will be 7 percent higher than it would be less than 40 miles away in Hartford.
In addition to thinking about the costs you’ll pay today, be sure to factor in your plans for tomorrow. If your family is growing, you should consider schools in the area. And if you are on the opposite end of life planning, nearing retirement, look for a place where you can make the most of not having to work.
Tips for buying a house in Connecticut
Before you start comparing mortgage rates in Connecticut, it’s helpful to know what kind of mortgage you’ll need. The amount of money you need to borrow will play a big role. Throughout most of Connecticut, the conforming loan limit is $647,200. There is one exception: Buyers in Fairfield County can borrow a bit more — up to $695,750 — before they need to opt for a jumbo loan. Jumbo loans come with a different set of standards, including the need for a higher credit score and the ability to make a larger down payment.
Things to know about buying a house in Connecticut
- Property taxes: Make sure to consider your annual financial responsibility to the government as you browse properties. Property tax rates in Connecticut are quite high – 1.76 percent of the property’s assessed value, according to the Tax Foundation, which is the fifth highest rate in the country.
- Dual agency: Dual agency is legal in Connecticut. That means that your real estate agent, or their brokerage, might also represent the seller of the property you want to buy, which can present some conflicts of interest. However, if this is the case, you and the seller would both have to sign off on the arrangement.
- Seller’s disclosure: Home sellers are required to complete a disclosure form with information about the history of the property and any known defects that might impact its value. As a buyer in Connecticut, if you don’t receive this form, the seller must pay you $500 at closing.
- Closing costs: Closing costs in Connecticut add a sizable chunk to every home purchase. In 2021, the average closing costs here added up to more than $8,800, according to data from ClosingCorp. However, you won’t be responsible for all that cash. Sellers cover the real estate transfer taxes — known here as “conveyance tax” – in Connecticut.
- Attorneys: The state of Connecticut requires that a real estate attorney oversee the closing. However, as a buyer, it’s wise to hire a lawyer much earlier in the process to make sure your interests are represented.
- Climate and weather considerations: In addition to budgeting for standard homeowners insurance to protect your new home in Connecticut, make sure you determine the flood risks in the area where you want to buy. The state has more than 600 miles of shoreline — beautiful, but potentially troublesome for anyone buying a home here.
How much house can I afford in Connecticut?
Figuring out how much you can spend on a home in Connecticut involves a range of numbers: how much you can contribute to a down payment, how much money you earn each month and how much you owe for other debts, like student loans and credit cards. As a baseline for your home budget, you should aim to spend less than 28 percent of your income on your mortgage payment. So, if you earn $7,000 each month, your housing expenses should not exceed $1,960. Use Bankrate’s new-home calculator to get a sense of what your budget should look like and how different mortgage rates will impact your payments.
Saving for a down payment in Connecticut
The median down payment in Connecticut was more than $32,600 in early 2022. That’s an amount that can feel impossible to save, especially for first-time buyers. However, don’t let the numbers overwhelm you. The Connecticut Housing Finance Authority offers a program that helps first-time homebuyers borrow up to $20,000 to go toward their down payment and closing expenses. It’s a second mortgage, but the good news is that it comes with a very low interest rate of just 1 percent.
It doesn’t have to be your first time purchasing a home to get some help with your down payment, either. For example, Hartford’s HouseHartford program has helped more than 1,300 low- and moderate-income families buy homes in the state capital. The city of New Haven also offers a deferred loan program that helps low-income buyers borrow up to $10,000 or 6 percent of the purchase price. Plus, if you live in the home you buy for a period of at least five years, the loan is fully forgiven.
Get preapproved for a mortgage
Once you have an idea of how much you can spend on a home, it’s time to give a lender a look around your finances. Assemble a range of documentation, like pay stubs, tax returns and bank statements, for the preapproval process. Actually, getting preapproved isn’t too much of a “process”; some lenders can issue this letter within 15 minutes. It’s easy, and it’s an essential part of buying a home. A Connecticut seller will expect to see a preapproval in order to take you seriously.
Find the right lender
You don’t have to officially apply for a mortgage with the same company that preapproved you (though you certainly can). It’s important to compare multiple lenders in Connecticut to see different options for rates, fees, discounts and closing timelines. Pay close attention to the APR when you’re looking at loan options: It offers a more well-rounded picture of the entire cost of the loan. Some lenders offer guaranteed rate matching, too, so you can always try to stir up some competition for your business.
Find a local Connecticut real estate agent
Rather than trying to buy a house without a Realtor, it’s smart to get the advice of a local real estate agent who can guide you through the journey. An experienced agent will listen to your budget and your needs to match you with properties that can fit your lifestyle. Most importantly, the best real estate agents will be one step ahead of everything, knowing when new properties are about to hit the market. Particularly in counties like New London, Hartford and Windham, where homes have been spending less than a week on the market, a savvy agent can give you a competitive edge. And if you’re trying to buy a house while living out of state, your agent can serve as your eyes and ears on the ground.
Start house hunting and make an offer
Now, you’re ready for the fun part: visiting homes in person, and picturing yourself living in them. House-hunting is exciting but can also be frustrating, especially due to the limited supply of homes for sale in Connecticut. So, go into this phase with an open mind about different types of properties, different layouts and different neighborhoods. Be willing to compromise, too. For example, are you willing to deal with a longer commute for a home that checks all your boxes otherwise? When you find a place you love, your real estate agent will help you put together a compelling offer to bring the seller to the bargaining table.
Get a home inspection and appraisal
Your offer was accepted? Congratulations. However, it’s not quite time to celebrate — it’s time to scrutinize. Even if you have reviewed the seller’s property disclosure form, you should still schedule a home inspection to have a professional look out for potential warning signs about the property. Follow this checklist to get a sense of the issues a home inspector is trained to identify.
While a home inspection is optional, an appraisal is a necessity if you’re getting a mortgage. Your lender will require one to verify that the price you have agreed to pay is an accurate valuation. If the appraisal comes under your offer, you’ll either need to come up with the cash that makes up the difference or negotiate with the seller for a lower price.
Final walk-through and closing on your new Connecticut home
You’re almost finished, but there are two final steps to complete. First, make sure you schedule a final walk-through just before you’re due to close on the home. This is to make sure the property is in good condition, with no surprises waiting for you when you move in.
As long as everything looks good, you can proceed to your closing. You’ll likely need to bring a certified check or cashier’s check to cover your closing costs, so make sure you take care of this in advance. Then, you’ll sit at a table for a while, signing documents and waiting for official steps — like transferring the title and moving funds between accounts — to happen. It shouldn’t take more than a couple hours. Then, you can sit back and smile. You are officially a homeowner in the Constitution State.
FAQs
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You’ll need a good credit score (at least a 620, but 740 will get you the best mortgage rates), a low debt-to-income ratio and enough money to cover a down payment and closing costs on the transaction. For a conventional loan, your down payment will need to equal at least 3 percent of the purchase price of the home, and very possibly more. If you want to avoid paying mortgage insurance premiums, you’ll need to put down at least 20 percent. And if you have less-than-perfect credit, consider an FHA loan for your home purchase in Connecticut. You may be able to get an FHA-backed mortgage with a credit score of just 500, provided that you can make a 10 percent down payment.
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Buying a house in Connecticut is very difficult right now. According to data from the latest Berkshire Hathaway New England quarterly report, the number of homes for sale in the state has declined by nearly 14 percent in the past year. Limited inventory has created a big problem for buyers: The typical home is selling for more than 3 percent above asking price. So, if you’re starting your homebuying journey in Connecticut, be prepared for the potential frustration of being outbid by other buyers with deeper pockets.
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It’s not a great time to buy a house in Connecticut. Home prices have been increasing, and the amount of time that homes sit on the market has been shrinking — a double whammy of bad news for buyers. If you’re on a tight budget and don’t need as much space, you may want to consider buying a condo or a townhome. While there is a shortage of available inventory of these property types, too, the median selling price is much lower: $222,500 versus $370,000 for single-family homes, according to data from Berkshire Hathaway New England.
