3 Things to Consider when Applying for a Home Loan in Another State

Applying for a home loan requires excellent credit and a sufficient income, regardless of where you are applying. When you are applying in a state that you do not currently live in, however, a lender will come to scrutinize these issues to an even greater degree. This means you must carefully prepare your application and assure your credit is in line before doing so. Beyond these requirements, you should consider some items that will make your cross-border application more or less appealing to a lender.

#1 Real Estate Values

You need to know what you can afford in a new state. For example, a two bedroom one bathroom home in Los Angeles may cost the same as a five bedroom four bath home in Montana. Real estate values are intrinsically tied to the property the home is located on. Shopping for a loan first, or looking for "pre-approval" on your mortgage, will give you an idea of what you can afford in your new state. Once you know your loan limit, you can look for properties valued around that price. If you are purchasing a second home, you may be using the value of your current home equity to secure a second mortgage. When you do this, make sure your appraisal is up to date. Your new lender may not know how to effectively value your property since values do differ so much between states.

#2 Income Adjustments

If you are moving to a new state, you should begin reviewing how the incomes in that state compare to those in your current home. For example, an upper-middle class income in rural Pennsylvania may be very different than an upper-middle class income in Philadelphia. Your new employer, or current employer if you are transferring, should give you an indication of the change in cost of living and change in income. However, when you apply for a mortgage, you will likely be providing a salary history for your lender. If this salary is lower than expected because you are coming from a state with a lower cost of living, be sure to point this out to your lender. Provide information about the new income you will receive after you move.

#3 Nationwide Lenders

One way to avoid a lot of this hassle is to opt for a nationwide lender instead of a local lender. A lender that has experience in home properties and income levels in your state as well as your new state will be able to make appropriate adjustments for you. The lender will know what you can likely afford in your new state based on your current home and income. In most cases, the lender has dealt with a very similar situation in the past. If you are trying to work with a community lender, you should be aware the responsibility of making sure the financial considerations are smooth through the transition will fall on you. Nationwide lenders can take some of this pressure off, and you may even be able to work with your current mortgage lender to gain a loan in a new state.