Alaska is one of the most beautiful states to live in, with its snow-capped mountains, azure lakes, and epic glaciers. And with just the right mix of urban centers and vast wildernesses, it stands as a great option for homebuyers who want to enjoy both the vibrancy of city life and the quietude of nature.
But, all of this comes at a literal cost. As a relatively remote state that experiences harsh winters, Alaska’s cost of living is understandably high. The median price for homes in Anchorage is $349,256 – a far cry from the national average of $272,446.
That being said, Alaska mortgage rates have been pretty close to the national average for the past few years, and they’ve even dipped lower quite a few times. So if you’re considering settling down in the Last Frontier, you best be keeping an eye on its latest mortgage rates.
Alaska Mortgage Loan Options
There are several different types of loans available to homebuyers in the US – each one with its own pros and cons.
These are loans issued by private lenders, banks, and mortgage companies, and are guaranteed by the agencies Fannie Mae and Freddie Mac.
There are two types of conventional loans – conforming and jumbo loans. The former are called such because they conform to the maximum borrowing limits set by the Federal Housing Finance Agency (FHFA). In most states, the borrowing limit is just $548,250. But like Hawaii and other high-cost markets, Alaska has higher conforming loan limits at $822,375.
Jumbo loans, on the other hand, exceed the maximum limit set for a loan amount.
Aside from conforming and jumbo loans, conventional loans can also be split into two categories – fixed-rate or adjustable-rate mortgages.
Fixed-rate mortgages come with a set or fixed interest rate. This interest rate stays the same up until the end of the loan’s life. These types of mortgages are available in 15-, 20-, and 30-year fixed terms.
The biggest advantage to getting a fixed-rate mortgage is predictability. When you get to pay the same premiums month to month, you can more easily adjust your finances to meet payments. The downside is that fixed-rate mortgages tend to be more expensive than their counterparts.
Adjustable-Rate Mortgage (ARM)
In contrast to fixed-rate mortgages, ARMs only have a fixed interest rate up until a set amount of time. After that initial period, the rate can fluctuate at least once per year according to market conditions.
Terms are often referred to as 5/1 7/1, and 10/1, wherein the first number represents the number of years the interest stays fixed, and the second number represents the number of times the rate may fluctuate in a year after the initial fixed period.
While less predictable than fixed-rate mortgages, ARMs usually come with lower interest in the initial fixed period, and thus lower monthly payments at the outset.
Government loans are usually low-interest, low-down payment loans issued by government agencies such as the FHA, the VA, and the USDA. These exist to help first-time and low-income homebuyers to get decent and affordable housing.
Federal Housing Administration (FHA) loan: These loans come with lower credit and down payment requirements than usual, as well as low mortgage rates overall. You can be eligible for an FHA loan if you borrow within FHA loan limits and maintain a minimum credit score of 500.
Veterans Affairs (VA) loan: Available to active duty and retired military members and their families, VA loans usually come with low interest and zero down payment requirements.
United States Department of Agriculture (USDA) loan: Issued to buyers in rural, USDA-eligible areas, these types of mortgages require no down payment and a relatively low PMI cost. You will, however, need to meet income requirements to qualify.
A refinance, or a refi, is the process of taking out a new loan to pay off an existing one. Most people who get refis do it to lower their monthly payment.
The two most common types of refinancing options are:
Rate and term refinance: Also called a traditional refi, this is when a current mortgage is paid using a new loan with better rates and/or terms. Conventional mortgages and government housing mortgages are all eligible for rate and term refinancing.
Cash-out refinance: This is a bit different from the traditional option in the sense that it allows homeowners to take a loan that is larger than their home value. In doing so, homeowners can pay off their previous mortgages and use the remaining money for other financial needs. It should be noted that most lenders require borrowers to have at least 20 percent home equity or a loan-to-value ratio of 80 percent or less.
Current Mortgage Rates In Alaska
As mentioned, Alaska real estate is considerably more expensive than other states’, with a median home value of $289,971 across the state and $349,256 in Anchorage, where about 40% of the population lives. For reference, the most affordable state to buy a home in is West Virginia, with a median listing price of just $166,488.
Here are the current refinance rates and mortgage rates in Alaska.
We get these mortgage and refinance rates from a survey of the nation’s major lenders. The list is updated daily.
Today’s Mortgage Rates in Alaska
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If you want a custom estimate of Alaska mortgage rates, you can head to the top of this page to use our rate tool. Just input your personal and financial details, and we’ll give you an estimate based on today's current interest rates.
First-Time Buyer Loan Programs In Alaska
Alaska classifies first-time home buyers as anyone who has not owned a primary residence in three years. If you find yourself in this group and you’re buying a home in Alaska, you can get help from state programs offered by the Alaska Housing Finance Corporation (AHFC).
The loan programs in Alaska often come with below-market mortgage rates, as well as assistance with closing costs and other expenses.
In 2021, Alaska Housing offers the following programs to first-time homebuyers:
First Home Limited Program
Through this program, first-time homebuyers who meet maximum income and acquisition cost limits may be eligible for a lower mortgage rate.
First Home Program
Unlike First Home Limited, this program has no maximum income or acquisition cost limits. As such, this program is best if you're a first-time homebuyer whose income exceeds the former program’s limits and want to secure a lower than average mortgage rate.
7 Steps To Buying A Home In Alaska
When you’re looking to buy a home in Alaska, you have to make unique considerations that you may not have to think about in warmer and less rural states like Florida or California. However, the homebuying process in Alaska is more or less the same as the process in the rest of the United States.
Step 1: Review Your Finances
Taking out a mortgage is a huge, long-term commitment, so you need to make sure you’re financially ready for it. There are two main mortgage requirements you need to reach before you can start buying a home:
Minimum FICO credit score: Your credit score is a reflection of your creditworthiness, or your ability to make payments on bills and debts. Lenders prioritize borrowers with high credit scores, as they want to make sure that they’ll be paid consistently and on time. Credit scores can range from 300 to 850, but you’ll need at least 620 to get a decent mortgage.
Minimum debt-to-income ratio: This ratio indicates how much you owe relative to how much you make monthly. Like your credit rating, your DTI is one of the key considerations lenders have when assessing a borrower. Your DTI should be around 40 percent, but you should be able to find a lender that can accept up to 50.
Apart from these requirements, you must ensure that you have enough money to cover for your monthly premium, mortgage rate, and the following upfront costs:
Minimum down payment: Most mortgage loans require at least 20 percent down. While many mortgage lenders will accept as low as 3 percent, keep in mind that paying lower than 20 percent usually means having to cover private mortgage insurance too.
Closing costs: A mortgage costs so much more than just the monthly premiums, interest, and down payment. At closing, you can expect to be charged for things like attorney fees, lender’s fees, mortgage points, courier fees, credit report fees, rate lock fees, underwriting fees, and origination fees as well. All in all, closing costs can amount to up to five percent of your principal amount.
Step 2: Get Pre-approved
Before you start looking at properties for sale, you should get yourself a pre-approval letter. With a letter, you give sellers the confidence that you as a buyer will have the financial capabilities to cover all the costs. On top of this, you also get a rough idea of how much you’ll need to purchase your home.
Step 3: Find A Reliable Real Estate Agent
If you’re not familiar with the real estate process, it would be extremely helpful to hire a real estate agent. This is especially true if you’re moving to Alaska, where things may be a bit different from other states. Your agent can help you get through all the confusing paperwork and review contracts to look for potential red flags.
And aside from having an insider’s knowledge of the neighborhood you’re looking at and the best property type for your needs, an agent can also help you scope out issues in a particular property – stuff that you may not even notice or consider like mold, insect nests, and septic tank replacements.
Step 4: Narrow Down Your Options
So how do you know if a house is right for you?
Firstly, know your deal breakers and priorities. Have a list of your needs, wants, and also the things that would prevent you from buying a home. For example, you may be sensitive to noise or you may not want to encounter wildlife in your backyard.
Hot tip: When writing down your needs, wants, and deal breakers, make a numbered list in order of preference.
And as the old adage goes, “location, location, location”. One of the biggest considerations homebuyers have is the neighborhood. Always consider the average value of homes in a potential neighborhood, trends in property appreciation, and the lifestyle of said neighborhood, from the schools to the shops to the local hangout spots.
Step 5: Make Your Offer
Remember not to take too long to decide on a home, as it can easily be snatched by other buyers. But don’t be hasty about it too. Take some time to really carefully consider all your options and wants, needs, and deal breakers.
When you’re set on a home, you can proceed to making an offer. Once you make an offer, you can put down your deposit.
Step 6: Appraisals And Home Inspections
Once your seller accepts your offer, you can hire an appraiser and an inspector to give the property a thorough assessment. After all, you need to make sure your house is in good condition before you move in. An appraisal also helps you assess your home’s actual property value. If you find an issue, you can use the results of your appraisal and home inspection to negotiate your price with your seller.
When buying a home in Alaska, it’s important to look at the quality of a home’s roof, as you’ll have to deal with heavy snow in the winter. Heating systems, plumbing, and electrical systems are also equally important. Testing for radon hazards is also imperative when buying a home in Alaska.
Finally, make sure you get a septic inspection to look for any potential issues. If the septic tank is particularly old, you may have to get a replacement, which you’ll have to factor into your re-negotiation.
Step 7: Close The Deal
When you’re satisfied with your property, it’s time to close the deal. At this point, you should be equipped to pay for all your closing costs. Have your real estate agent walk you through all the paperwork before signing off on anything.
The Bottom Line
Buying a home in Alaska is a little different from the rest of the US. But as long as you do your due diligence and come prepared, you should be able to strike a deal that works for you. And remember to keep a close eye on Alaska mortgage interest rates so you can get the best value for your loan type.
If you want to learn more about mortgage rates in other states, understand how interest rates work, find detailed mortgage resources, or even get insider advice on life insurance, Wesley LLC has got you covered. You can do your own research through our blogs, or you can also contact us for an in-depth and personalized consultation today.