How to buy a house out of state

Whether your motivation is to move closer to family or a new job, invest in a second home, or take advantage of the today’s remote work-friendly environment, there are many reasons you may be looking to purchase a home out of state. Long-distance house-hunting is a process, but with careful planning, you can find the right home across state lines, or even the country. Here are the steps to get started.

Timeline for buying a house out of state

Finding a home in another state will require you to invest a bit of your time — obviously more than moving across town would do. On the low end, it could take anywhere from three to six weeks, since most lenders need at least that amount of time to approve your mortgage loan. On the high end, the process could take several months.

All told, the process of buying a home can take about four months, and potentially longer if you’re moving to an area you’re unfamiliar with.

Some other questions to consider when figuring a timeline:

• Will you be selling your current home first? If so, it could sell faster than the time it takes you to find another one, which can complicate your timing.
• Do you need to move quickly? If so, you may have to buy the home (or at least make an offer on it) sight-unseen.
• Does your new home have to be move-in ready, or do you have the flexibility to do renovations?
• Are you prepared to move tomorrow, or do you need time to sort through your belongings?
• Will there be considerable time spent traveling for your move?

These and other factors can all influence your plan and timing.

One thing is for sure, when moving out of state, you will not have the luxury of spending a lot of time touring properties and going to open houses. This is the reason that getting organized and creating an effective strategy is the first thing you need to do to relocate to a new state.

10 steps to buy a house out of state

1. Create a plan

As with any home purchase, begin by evaluating your finances.

Whether you’re a first-time homebuyer and relocating or selling your current home to move out of state, you’ll need enough funds for a down payment — the amount of which depends on home prices in your new state and the kind of mortgage you plan to get.

If part of your down payment is coming from a relative or friend, plan to have that money in your possession well ahead of applying for a mortgage (and if you’re switching to a local bank in your new area, make sure it’s in this account). If, instead, you plan to use some of the proceeds from the sale of your current home, consider how much of your current mortgage you have left and how much you stand to profit after paying it off, along with closing costs and taxes.

There are also costs associated with buying a home, including:

• Buyer closing costs
• Property taxes
• Homeowners insurance
• Mortgage insurance
• HOA fees

Taking these expenses into account can help you determine how much house you can afford in your new state.

While you line up your finances, check your credit report for any errors, such as incorrect or misspelled names or accounts you don’t recognize. If you spot an issue, you’ll have time to fix it before you begin looking at homes. Likewise, if your credit score could use improvement, now’s the time to work on it. Aim to make all debt payments on time, or pay down or pay off debt, if possible.

2. Compare costs of living

“Moving to another state is a much bigger deal than moving within your neighborhood,” explains Steven M. John, SCRP, SGMS-T, president and CEO of HomeServices Relocation, based in Minneapolis, Minnesota. “Everything changes, and it’s important to do research to get an idea of how things may be different.”

You can begin initial research about your new state online, John says. Family or friends who live in the area can also be a resource for information. You’ll want to learn about:

• Affordability – The housing market in your new state could be cheaper or costlier than where you currently live, so explore the local market to get a sense of what homes are going for. One good place to start is the local or regional Realtor association, which typically publishes the latest home price data. You can use Bankrate’s cost of living calculator to see home prices and cost of living information for certain cities.
• Neighborhoods – If you don’t know which neighborhood you want to buy a home in, consider what’s important to you in a community, such as the schools, public transit or walkability. Have an understanding of the school district boundaries, too. With a quick search, you can find several websites with neighborhood rankings and information, and for an insider’s perspective, check out local Facebook groups or Nextdoor.
• Job market – Unless you’re already relocating for work, look into the local job market to see which companies have a presence in the area and what jobs are currently available. The local Chamber of Commerce’s website can be helpful in this search. Ideally, you’d have a job lined up before your move, but if not, it can’t hurt to start applying and interviewing in advance.
• Local real estate laws – Property and real estate transaction laws can vary by city, county and state. Your new city could have different rules (or even definitions) regarding disclosures, for example, or zoning variances, inspections, deeds and property lines.
• Property taxes — Property tax rates vary by municipality. If you have your eye on a property, contact the state’s Department of Assessment and Taxation to learn what the tax rates are in the area. It can be smart to consult with a tax professional, as well, to learn about any differences in state or property taxes.
• Varying closing costs — Closing costs vary by location (partly due to the property tax rates and transfer tax rates, if any), property type and the type of mortgage you have. Your real estate agent should be able to furnish a sense of how much it will cost to close on your new property.

3. Visit your new city and shop for a home

If possible, plan a visit to your new city and coordinate a tour of the area and prospective homes with your real estate agent. Alternatively, if you’re unable or unwilling to travel, your agent can help facilitate this remotely. It’s not uncommon to view homes virtually and bid on them — in fact, in 2020, about two-thirds of homebuyers made an offer on a property sight unseen, according to a survey from real estate brokerage Redfin.

“During COVID, there has definitely been an increase in sight-unseen purchases,” Garrett says. “Obviously, one should only do this with an abundance of caution. Knowing that you have not seen the house, your Realtor is apt to be extra cautious on your behalf and is likely to over-communicate and take pictures of many aspects of the home.”

4. Find a real estate agent

As you research your new city, now’s the time to find a real estate agent you can trust — especially if you’ll be relying on your agent to handle much of the home-buying process remotely.

“Some agents may specialize in relocation and not only understand the extra stress of being in a new and unknown location, but who also go above and beyond to provide their clients with information about auto-registration, schools, voter registration and even referrals for childcare and home care,” explains Chuck Garrett, CRP, senior vice president of brokerage at Corcoran Pacific Properties in Honolulu.

Don’t hesitate to interview one or two agents to ensure you find the right match in terms of communication style and experience, Garrett says. It’s also a good idea to ask for references, and then ask the references if they’d work with that agent again.

If you’re moving for a job, you might also be able to take advantage of your new company’s relocation services. “Relocation management companies generally work with employers to facilitate company-sponsored benefits for work-related relocations,” explains John. “If you are moving at the request of your employer, work closely with the RMC counselor assigned to you.”

5. Line up a mortgage

Unless you plan to pay with cash, you’ll need to get a mortgage for your new house out of state.

Begin by comparing mortgage lenders licensed in your new state — your own bank might only operate in your current state or in a certain region. Consider the lender’s rates and fees, as well as what’s important to you as far as experience. Do you want to be able to visit a loan officer in person? Apply through an app? Close within a certain timeframe? Reviewing a lender’s overall customer satisfaction or “best of” rankings can help you narrow down your options, too.

Once you have a short list, get prequalified or pre-approved, John recommends. Both processes involve giving the lender information about your credit and financial situation, but with a pre-approval, you’ll be able to make offers on homes with the financing to back it up. (Pre-approval isn’t a guarantee, but it’s close, and many sellers demand it before they’ll consider a bid.)

If you’re moving for a new job, provide your lender a copy of the offer from your new employer that includes your start date and pay. If you don’t have a new job yet, avoid changes like transitioning from full-time employment to contract work or switching to a new industry, since your lender’s main concern is going to be your ability to repay a loan. There are exceptions, however, including military service members returning from deployment or full-time students just starting in the workforce.

6. Make an offer

If you’re buying in a competitive market, be prepared to make an offer quickly once you find a home you like. Along with the offer price, the proposed purchase agreement should include:

• Earnest money – This is the deposit you’ll put down before closing, usually between 1 percent and 3 percent of the home’s purchase price — although it can be as high as 10 percent in a really hot market. These funds are typically placed in an escrow account and then applied to your down payment or closing costs at closing.
• Contingencies – These specify that the purchase of the home will only happen if certain conditions are met. Some buyers are forgoing contingencies like the home inspection in order to get their offer accepted, but this is not a wise move, especially if you’re already buying the home sight unseen. You can consult with your real estate agent to determine the best strategy, but it’s always better to have an inspection than not.
• Expiration date – This states the expiration of the offer (ideally, 24 hours) as well as a projected closing date. Stipulate that the listing agent and seller can’t disclose your offer to any other interested parties — this could be a tactic to bid up the price.

Depending on where you’re buying, you might have to prepare to pay above list price, or for your offer to be turned down. Your agent can help set realistic expectations ahead of time, and guide you if you receive a counteroffer or want to outbid another buyer. If you’re considering raising your offer, know your limit and don’t get caught up in the drama if you can help it — over a 30-year mortgage, a bit of patience can save you lots of money.

7. Get a home inspection

A home inspection is an examination of a home’s condition and can help you identify any areas in need of repair or decide whether to move forward with the purchase. Your real estate agent can connect you with a local home inspector in your new state, but you’ll be responsible for paying for the inspection. The cost can vary from location to location, as well as by the age and size of the home.

While it’s generally a good idea to be on-site during the inspection, it’s not mandatory, and might not be feasible if you’re several states away. In this case, your agent can attend, share the inspection report with you and discuss the next steps.

If issues surface, you could try to negotiate with the seller to make a repair or give you a break on the price, but this doesn’t always work in the buyer’s favor if there are other offers. If the seller won’t address the issue, you might choose to remedy it yourself — this could require finding a local contractor — or simply walk away.

Note that a home inspection simply empowers you with information — it won’t reveal how much a repair costs, for example. As such, it can be helpful to also have a general contractor or engineer weigh in on any issues.

8. Hire a reputable long-distance mover

While it’s possible to do a long-distance move yourself,  buying a house out of state and then moving there isn’t as easy as it sounds, so it’s best to hire a reputable moving company. When researching movers, aim to compare at least three companies, and read through reviews and verify their credentials and insurance. If you’re moving across state lines, confirm that the mover is licensed as an interstate carrier.

When comparing quotes, keep in mind that the cost can depend on how far the truck needs to travel, the weight of your furnishings and whether you’ll need packing or storage services. Ask whether the move will be a partial or full load, and whether it’ll be direct or require multiple stops. Be sure these are factored into the quotes so you have accurate estimates.

9. Schedule a remote closing

A remote closing is very much the same as the typical closing; it involves uploading notary documents and your ID online, then connecting with a notary over video.

“A remote, online notary is allowed in 34 states and all states have mobile notaries that will come to you,” John says.

This is also when you’ll be expected to pay closing costs via electronic or wire transfer, so contact the institution where the funds are coming from several days ahead of the closing to make sure you understand how transfers work.

If possible, though, do your best to attend the closing in person and bring a certified check. Wire and escrow fraud is becoming more and more common in real estate transactions, and scams are becoming more sophisticated. If you absolutely need to wire the funds, call your settlement or title company directly to confirm the instructions.

Also ahead of closing, you’ll need to obtain a new homeowners insurance policy. If you currently own a home and aren’t sure if you want to stick with your current insurer, now’s a good time to get quotes from other providers. Just be sure to keep your current policy in place until the closing.

10. Make final moving preparations

After closing, it’s time to finalize preparations for the big move. These arrangements might include:

• Changing your address and forwarding your mail
• Contacting local utility companies to set up or transfer service
• Changing your driver’s license and vehicle registration
• Registering to vote in your new state
• Updating your health insurance provider and finding local healthcare practitioners and a pharmacy

Finding a local real estate agent

To aid with your move, looking for a local real estate agent does not have to be hard. The National Association of Realtors (NAR) advises prospective homebuyers to use Realtor.com’s search engine to find a real estate agent in a particular housing market. Its database allows you to view realtors’ ratings and the number of sales they have made.

When looking for an agent, be sure to choose one who is experienced in dealing with out-of-towners. NAR has a designation for such Realtors:  Certified Relocation Specialist. Relocation Specialists are skilled at working with clients relocating from afar, and, while they can’t guarantee a pain-free process, they can certainly anticipate questions and deal with the logistics.

FAQs

• Does your mortgage lender need to be in the same state?

  Yes, you can get a loan even if you are not in the same state as the lender . But it depends on the type you choose.
  
  
  Typically, local lenders only lend within the immediate geographic area, as the name implies, but regional and national lenders can offer you a loan even if you are not within the same state.
  
  
  If you are going to get a loan from an out-of-state lender, be sure to compare their interest rates, as they may be slightly higher than those of a local lender. The Department of Housing and Urban Development (HUD) has an easy-to-use search engine that can help you locate one.
  

• Can I buy a house in another state without a job there?

  To get a mortgage, you need to show that you have a source of stable income and the ability to pay back the loan over the series of monthly payments. So, getting a house without a job can be kind of tricky, but it’s not impossible.
  
  
  Without a job, you will still need to show that you have or will have a steady source of income. You can achieve this by showing your mortgage lender:

  • two year history of self-employment income
  • an offer letter from your new employer that states that you will start within 30 days of closing
  • an income statement of a co-signer such as a parent or spouse
  • a statement showing a reliable source of income, such as investment income  rental property income, etc.
  • A statement showing that you receive Social Security, public assistance or retirement income
  • a court record showing an order for alimony or child support

• Can I qualify for a home loan out of state?

  Yes, you can qualify for a home loan or HELOC while you are out of state. Much like getting a mortgage, you need to work with a regional or national mortgage company for the financing, if you’re long distance.