Buying a home out of state: Here’s where to start

Buying a house out of state can be complicated. But the good news is, things aren’t as hard as they used to be.

Remote home viewings, online mortgages, and even digital closings all became more common during the Covid pandemic. So home shoppers looking out of state have a much bigger toolkit than they did in the past.

And, once you find a local agent and lender, you’ll have two great resources on your side helping you through the process.

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6 Steps to buying a house out of state

If you’re planning to buy a house out of state, but you’re not sure where to start, here are six helpful steps recommended by mortgage and real estate experts.

1. Research neighborhoods before house hunting

“Narrow down a specific area to dedicate your house hunting to. This doesn’t mean you can’t consider other destinations, but it’s going to dramatically multiply your workload until you can narrow it down,” says Martin Orefice, CEO of Rent To Own Labs.

That means scouting out a specific area or neighborhood remotely online. Learn about:

• The cost of living
• Property taxes
• Quality of the school districts
• Crime rate
• Proximity to community services
• Nearby stores, facilities, and parks

Also, consider things like the area’s political leanings and the future impact of climate change on the region.

When you start looking at homes, give careful thought to your expected future earnings and job security, and plans to grow or shrink your household size.

Will the properties you’re looking at accommodate a larger family down the line if that’s one of your goals? Are they on a large enough plot to be extended or modified? What are your deal–breakers?

You can work with a financial planner and/or tax consultant to help determine your future financial goals and how a relocation may affect those aims.

2. Find a great local real estate team

“The most difficult thing about buying in other states, especially if you are still in the state you are moving from, is finding a reliable lender that can do loans in the state of purchase,” says Jon Meyer, a licensed loan officer and The Mortgage Reports’ lending expert.

Keep in mind that loan officers have to be licensed state–by–state, and your current lender might not be an option where you’re moving.

While you are visiting your desired area, or while you’re searching remotely, make it one of your goals to find and recruit a great local real estate agent.

“It is smart to use a local lender, expecially in competitive markets”

—Maggie Wells, real estate agent

“Have a buyer consultation with this agent so that you understand the process and the market, and ask for lender recommendations, as it is smart to use a local lender, especially in competitive markets,” suggests Maggie Wells, a real estate agent in Lexington, Kentucky.

Your agent can also refer you to other players you may need in the process, including the title company and a real estate attorney.

“Some states are very particular about who can and cannot be involved in real estate transactions. Learn the requirements for buying a house in another state. A good Realtor can help with this, but depending on the state you may also need to enlist an attorney,” notes John Moffatt, head of origination at digital mortgage company Better.

3. Get preapproved and start house hunting

Once you’ve connected with a local lender or mortgage broker, it’s time to get preapproved for a home loan.

Getting preapproved for a mortgage loan is strongly advised, as it will help you determine how much house you can afford in your desired market. It will also position you to make a more attractive offer on a home.

In fact, in today’s competitive market, most sellers and sellers’ agents won’t even consider an offer without a preapproval letter. So this step is crucial.

“Once you are preapproved and have a good feel on price points, ask your real estate agent to set you up on a remote home search,” suggests Wells.

“Get a feel for prices in that market and get a better idea of what you can afford. Go on virtual tours as soon as properties hit the market. And ask questions about anything you aren’t sure of or don’t understand.”

4. Prep and list your home for sale

If you have an existing home to sell before you can move, you’ll need to recruit a separate real estate agent to help you market and list that property. Make any repairs or upgrades now, if necessary, to help your home sell quickly.

The good news is that with the housing market so hot, many sellers are having no trouble finding willing buyers. And plenty of properties are selling well above the asking price. So while selling your home quickly may have been a bigger roadblock to moving out of state in the past, it should be less of an issue now.

5. Consider home sale contingencies

One challenge homeowners can face when moving out of state is having their new home purchase contingent on the sale of their existing home.

A ‘home sale contingency’ means your new home purchase will only go through if you can sell your current home by a specified date. These clauses are sometimes required to avoid the buyer owning two homes and having two mortgages at the same time.

Having a home sale contingency does not mean you have to wait on house hunting until your current home sells. As Meyer explains, you “can get approved, but won’t get what we refer to as “CTC” (clear to close) until the other home is sold and funds are verified.”

Of course, the logistics can be more complicated if you’re managing contracts in two states at the same time.

So before you get serious about house hunting, make sure you talk with your lender about whether your purchase will be contingent on the sale of your current home. And, if so, what that will mean for your timeline.

6. Make an offer and don’t skip the inspection

Work closely with your agent to make an offer remotely. Avoid the impulse to waive your professional inspection contingency, as it’s wise to carefully inspect the property for defects and red flags.

“If you are going to travel back to the area, try to time it so that you can be present during the inspection period. This is usually your last opportunity to get in the house before the final walk–through,” Wells recommends.

Once your offer has been accepted, your representatives will set a date for closing, which you may be able to complete remotely if you cannot yet be present. Digital closings became more common during the Covid pandemic and are now much more widespread than before.

Now is the time to also line up moving services and prepare your family for the relocation.

Potential challenges when buying out of state

Buying a house is already a complex process, and doing so in a different state can be an added challenge. But having a great lender and buyer’s agent will be a huge help along the way. When snags occur, trust in your real estate agent to guide you through the process.

Also, don’t forget that moving can be costlier than you think.

Save a minimum of $5,000 for relocation costs and unexpected moving expenses.

“I recommend saving a minimum of $5,000 for relocation costs. There are unforeseen expenses when it comes to moving out of state, including transportation, moving fees, and new furniture,” says Ken Pozek, a real estate agent and owner of The Pozek Group in Orlando.

Lastly, give yourself time to properly acclimate to your new location once you move. It can take a while to adapt to a fresh locale and make new friends.

“When you move to another state, you are often getting way outside of what your background knowledge covers. Even simple everyday things can be different, so remain patient and open–minded,” Orefice suggests.

Good candidates for an out–of–state move

According to a recent North American Moving Services report, over 20% more Americans moved in 2021 versus 2020. Many of those opted to relocate to a different state.

According to the same report, “the Carolinas, Tennessee, Florida, Arizona and Texas are the top destinations for
movers.”

“Some of the primary reasons why prospective buyers consider purchasing a home in a different state include lower taxes, better weather, and a more affordable cost of living,” says Pozek.

He adds that millennials have proven to be the generation that moves the most, especially during the pandemic.

“Since millennials are most likely not married or don’t have children, they are more open to packing up and moving to a new location,” he says.

“Soon–to–be retirees and professionals who receive promotions and/or advancement opportunities with relocation are also good prospects, as are many college graduates,” adds Chuck Meier, senior vice president of mortgage sales for Sunrise Banks.

Anyone who can work remotely, “as well as those who can find work just about anywhere, such as teachers and health care workers,” should also consider moving out of state, according to Orefice.

Your next steps

Buying a house out of state might seem intimidating. But it’s totally doable if you take it one step at a time and rely on the experts you’ve hired to help you along the way.

If you’re ready to get serious about home buying, contact a mortgage lender as soon as possible to determine your budget and start your move out on the right foot.