Mortgage Rates Montana | How To Get The Best Home Loan
Montana is home to stunning mountain ranges and the revered Glacier National Park. Adventurous homeowners will love the state for its abundance of outdoor recreational activities and low interest rates. However, rising property values mean you’ll want to act quickly.
Fortunately, we can help you find your dream home! In this guide, you’ll learn about loan types in Montana and how to get the best deal in the state.
Mortgage Options In Montana
Compared to other states, Montana has slightly more affordable mortgage rates. Because of its affordability, Montana has a homeownership rate of 68.1%. Let’s take a closer look at loan options for American homebuyers below.
Conventional Loans
Conventional loans are the most common mortgage type in Montana. Buyers can apply for this loan type with a Montana bank, private lender, or mortgage company.
The current conforming loan limits in the state of Montana are $548,250 for a single-unit home and up to $1,054,500 for a four-unit multiplex. The median home price in Montana is $340,532.
Fixed-Rate Mortgage
Montana banks offer 15-year to 30-year fixed-rate loans. This option is ideal for potential buyers who intend to remain in their new home for longer. Because interest rates remain unchanging for the entirety of the loan, homeowners can more easily budget for their monthly mortgage fees.
Borrowers can pay off their home quicker by making pre-payments. Currently, the average interest rate for a 30-year fixed-rate loan in Montana is 2.78%.
Adjustable-Rate Mortgage (ARM)
Unlike their 15 to 30-year fixed-rate counterparts, adjustable-rate mortgages in the state of Montana come with a lower initial interest rate. At the end of one to ten years, this interest rate will vary according to the housing market.
This fixed-rate period will depend on what type of ARM you take out. A 7/1 ARM’s adjustable-rate period begins after seven years. 5/1 adjustable-rate mortgages are also available.
Currently, the average rate for an ARM in Montana is 3.04%.
Government-Backed Loans
FHA Mortgage
If you have a bad credit history, you can apply for an FHA loan with a credit score of as low as 580 and a debt-to-income (DTI) ratio of 50%. If you have a lower credit score of between 500 and 579, you will have to make a down payment of at least 10%. 3.5% of this down payment must come from your funding – a relative can gift the remainder.
VA Mortgage
Montana veterans can receive 100% financing with a VA loan. Military service members must have at least served for 90 days during wartime and 181 days during peacetime. They will also need a credit score of at least 620.
These flexible loans don’t require mortgage insurance and have a simple underwriting process. Applicants who don’t have a credit history can present alternative data such as payslips and bank accounts.
USDA Mortgage
If you can’t qualify for a VA or FHA mortgage, you can apply for a USDA loan in Montana. Low-to-moderate income families can get 100% funding with a credit score of 640 and a DTI ratio of 41%.
Though USDA loans in Montana require mortgage insurance, rates are lower compared to other states.
Jumbo Loans
Because most Montana homes fall within conforming loan limits and a relatively low median home value, jumbo loans are not as common. However, they are still available at higher interest and boast an average rate of 2.62%.
Refinance Loans
Homeowners who want an extended payback period can apply for a mortgage refinance. 30-year fixed refinance rates in Montana are three basis points below its purchase rate, which is currently at 3.88%. Lenders use data like basis points to compare changing state mortgage rates.
Home Equity Loans
Buyers who want the ability to convert their home equity into cash can apply for a HELOC. These loans satisfy short and long-term needs such as home remodeling, debt consolidation, and more.
First-Time Homebuyer Programs In Montana
If you’re having trouble settling down in the Big Sky Country, these programs can help you secure the property type you want.
Down Payment Assistance
When buying a home for the first time, making up the minimum down payment amount can be challenging. Montana homebuyers who require down payment assistance have two options.
First, they can apply for the Bond Advantage DPA, which covers a 15-year mortgage of up to 5% of the home price. Borrowers will have to invest at least $100,000 and have a credit rating of 620. They must also complete a homebuyer education course.
A second option is the MBOH Plus 0% Deferred DPA, which covers a 0% interest rate mortgage for up to 5% of the home price without monthly payments. Borrowers must invest $1,000, have a minimum credit rating of 620, a DTI ratio of 45%, and an income limit of $55,000.
Regular Bond
Eligible first-time homebuyers can apply for a regular bond for 30-year, low-interest mortgages. Homebuyers must meet a household income minimum depending on their credit history and conform to property value limits.
If qualified, homebuyers can purchase a single-family home, manufactured home, or condominium.
80% Combined
If you qualify for an FHA loan but don’t want to pay mortgage insurance, you can apply for the 80% Combined Program. The homeowner will then have to pay off two mortgages – a 30-year mortgage at 80% and a second mortgage at 20%.
Mortgage Credit Certificate
Borrowers who want to lower federal income tax can apply for a Mortgage Credit Certificate, which applies to 20% of the mortgage interest rate.
How To Buy A Home In Montana
Now that you know about mortgage rates in Montana, it’s time to go house hunting. Below are a few steps to help you purchase the home of your dreams!
Understand Your Finances
Your financial situation can affect your mortgage and refinance rates – especially if you’re borrowing more than you can afford. To get the best mortgage rates in Montana, you’ll want to take down details such as your:
- Credit rating
- Debt-to-income ratio
- Homeownership costs
- Monthly and annual income
Research Your Potential Neighborhood
Home values and lifestyle are just a few factors that can affect your future living conditions. Research historical trends in home equity and median home costs to determine whether you can keep up with Montana mortgage rates.
Mortgage resources such as the NMLS are rich in tools like mortgage calculators and aggregators for the best Montana lenders. If you are decided on a location, these tools can help you better understand mortgage rate trends and home values.
Work With A Realtor
Your choice of a real estate agent can significantly impact your success in the home buying process. If you want to secure the best Montana mortgage rates, work with a real estate agent with local experience and good reviews. Also, consider factors such as their fees and how quickly they can help you close.
Remember, experience isn’t always a sign of how dependable a real estate agent is. Instead, consider details such as their fees, how they respond to negative feedback, and how many transactions they successfully perform in a year.
Get Pre-Approved
Some lenders require a mortgage pre-approval letter before transacting with you. Especially for first-time homebuyers, getting pre-approved is evidence of your financial stability.
Pre-approval can help you secure a lower Montana mortgage rate and lower your overall mortgage balance.
Find A House & Make An Offer
When house hunting, think about what you need – not what you want. Make a list of priorities and compare properties according to home price.
When you make an offer, you’ll want to do it fast. On average, Montana homes only remain on the market for an average of 77 days before someone makes an offer.
Inspect & Appraise
Inspecting and appraising a property before you agree on its loan terms are critical to avoiding costly repairs and higher rates. If your professional inspector spots an issue that a seller has not disclosed, you can negotiate a lower mortgage rate or monthly payment.
Close Your Purchase
Finally, it’s time to close! Once both parties are satisfied with the loan amount and loan terms, a title company will record the sale at your local courthouse.
How To Get Better Interest Rates On Your Montana Home Loan
In some cases, you can secure even lower mortgage rates than the national average. If you can’t afford today’s mortgage rates, here are a few tips for lowering your ARM rate and monthly payment.
Improve Your Credit Score
One of the quickest ways to lower your mortgage rate is to improve your credit rating. You can increase your score by paying off debts on credit cards and student loans. Whenever possible, review your bank account and credit report, correcting any potential errors.
Buy Discount Points
Some loan programs allow borrowers to purchase discount points to lower their mortgage rates. Borrowers can buy discount points upon closing. A discount point is equal to one percent of your total loan amount. For instance, one discount point on a $150,000 loan would equal $1,500.
Make A Bigger Down Payment
While conventional home loans accept down payments of as low as 3%, borrowers become subject to mortgage insurance. By making at least a 20% down payment, you can eliminate the need to pay private mortgage insurance and lower your monthly fees.
Consider Your Loan Term
While applying for a 30-year fixed-rate loan doesn’t guarantee that you pay less in the long run, it makes your monthly rate predictable and easier to budget. If you don’t foresee living in a particular neighborhood for more than a few decades, consider a 15-year loan term instead of a 30-year fixed mortgage.
The Bottom Line
This guide is helpful for potential homebuyers who want to secure the best mortgages in the state of Montana. By following the tips listed above, you can pay lower monthly fees for the home you’ve always wanted!
For more details on mortgage rates and home loans in Montana, don’t hesitate to reach out to our experts at Wesley LLC. We publish valuable advice and content for homebuyers and refinancers.