The Constitution State draws in families looking for great school systems. It’s ranked top-twelve for best school systems for kids and has one of the best-known colleges in the world: Yale University. Connecticut
is a great place to buy a home for intellectual families. If you’ve never bought a house before or are new to the Connecticut housing market, there’s probably a lot for you to learn.
Don’t worry; car and home insurance
super app Jerry
is here with a guide for home buyers looking to purchase in Connecticut. Figure out your finances
Buying a home is one of the largest investments you’ll make in your life, so you want to make sure you’re financially prepared for owning a home in Connecticut.
Before you hop onto Zillow or Redfin to browse for your dream home, you have to do the dirty work. While not as glamorous, you need to establish a budget, understand your credit score, learn your debt-to-income ratio (DTI), determine a reasonable down payment, and estimate what you can afford in monthly housing costs.
Check your credit score
For most purchases requiring loans, like homes and cars, your credit score will play one of the biggest determining factors in your eligibility for a large purchase. Your first step should be checking, understanding, and improving your credit score.
Most home lenders will lend to people with a minimum credit score of 620, and Connecticut is no exception. That said, the higher your credit score, the more likely you are for approval and the better your loan terms will be.
If you check your credit and realize your score is below 620, you have options:
Prioritize increasing your credit score. Focus on paying off your old debts, paying anything in collections, and establishing a longer credit history (don’t close those old credit cards!).
There are programs for people struggling with their financial situation. The Federal Housing Administration (FHA) and Veterans Administration (VA) offer mortgages for homebuyers with credit scores as low as 523 and 500, respectively. You are only eligible for a VA loan if you are a retired veteran or are an active-duty member.
Calculate your debt-to-income ratio
If you have a stellar credit score (generally anything over 780) but a high debt-to-income ratio (DTI), you might not qualify for a loan. Try to keep your DTI below 50%. The best applicants typically keep their DTI below 36%, especially if they’re applying for conventional mortgages.
Your DTI shows what you can afford monthly. You can calculate your DTI by adding up your monthly payments and dividing them by your pre-tax income. Payments that count towards your DTI include:
Determine your down payment
Ok, so you’ve figured out your credit score and DTI and you have a general sense of what you can afford. A lender will then ask for a down payment to show that you can afford the house. It’s a gesture of trust for a lender when you’ve saved up enough money for a down payment.
A traditional mortgage typically requires 20% of the mortgage value as your down payment.
If a 20% down payment seems like a stretch, you can look into a Federal Housing Administration (FHA) loan or Veterans Administration (VA). Here’s what you need to know:
FHA loan: A mortgage insured by the Federal Housing Administration for low- and moderate-income homebuyers (especially first-time homeowners)
VA home loan: A mortgage insured by the Veterans Administration for servicemembers, veterans, and eligible surviving spouses
FHA mortgages qualify for down payments as low as 3.5% if your credit score is good enough (usually around 580). If you are a veteran or active-duty military member, you may qualify for a VA loan. For a VA loan, you may be able to make no down payment at all! VA loans also offer competitively low-interest rates and lower closing costs.
Prepare for closing costs and other fees
Closing costs might sound like a familiar term, but it’s okay if you’re not sure exactly what it means. Closing costs help cover many of the costs associated with selling a house. Buyers often pay closing costs to seem like better candidates to a buyer (especially in competitive markets). Closing costs generally cover:
Home appraisal (required by most lenders) fee
Earnest money (i.e., a good-faith deposit that will go towards your down payment)
Closing costs in Connecticut are typically between 2-5% of the home’s total value. According to Zillow’s Home Value Index,
the average home value in Connecticut is $331,589—meaning that closing costs could come out to as much as $16,580! Property taxes in Connecticut average about 2.14%, making it one of the most expensive states in the US. The exact rate, though, varies by city. Stamford, Connecticut’s most expensive city, has a property tax rate of nearly 27% as of 2021. Torrington, which is Connecticut’s most affordable city, has a property tax rate of 46%.
If this feels discouraging, there’s good news: Connecticut offers down payment assistance program that offers a second mortgage with the same rate as your first for roughly 3% of the purchase price.
Key Takeaway Check the property tax rate in the county where you’re hoping to buy a house before you begin.
Look for homeowners insurance
The average cost of homeowners insurance in the US is $1,387 per year or $115 per month. If you’re asking yourself if you need insurance, the answer is, likely, yes. Lenders usually require homeowners insurance before closing, and it’s something you usually have to carry for the life of your mortgage.
The good news is that Connecticut, on average, has a lower home insurance rate than the rest of the nation, coming in as low as $1,100 a year.
Even with a rate lower than the national average, you should still shop around to find even lower rates. Use Jerry
to make comparison shopping easy. Jerry compares personalized rates from the nation’s top providers for free. MORE: Does home insurance cover flooded basements?
Key Takeaway Evaluating your finances is the first step to buying a house in Connecticut. Calculate your credit score, DTI, and savings for a down payment and closing costs before you start shopping for your dream home.
Get preapproved for a mortgage
You’ve done all the budgeting work and now you’re ready to sign, right? Well, not yet. You should get a preapproval letter.
This is beneficial for several reasons. This gives you negotiation power when it comes to applying for your mortgage. This also shows sellers that you’re serious about buying a home; some sellers won’t even let you tour the property without showing proof that you’re prequalified for a mortgage.
Not sure how to get preapproved for a mortgage? Here’s what to do:
Provide the lender with your Social Security number
Create a list of all banking information, employment history, assets, and debts
Fill out a mortgage application
Preapproval is one of the last steps before you buy a home, which means you should do this when you know you’re serious and ready to buy a home.
This is important because lenders will do a hard inquiry against your credit to verify your credit score, DTI, and eligibility for a loan. Hard inquiries lower your credit score, so if you wait to buy and your preapproval expires, this could hinder your future attempts.
How to pick the right mortgage in Connecticut
Choosing the right mortgage has long-lasting effects on your finances, so be mindful of the mortgage term and interest rate you sign for.
The two most common mortgage terms are 30 years and 15 years.
The longer mortgage term comes with lower monthly payments, but you’ll have a higher interest rate (around 3.5% on average). On the other hand, a 15-year mortgage can have an interest rate as low as 2.5% or lower, but you’ll make higher monthly payments in exchange for that low rate. Compare your loan options from a few lenders before making the decision.
Look for a house
Yes; this is the part you have been eagerly waiting for! Once you know what you can afford and what a bank is willing to lend you, you can start browning listings within your budget.
Pick your city or neighborhood
Where you live should match your lifestyle, so be sure that the neighborhoods you look at meet your expectations for the cost of living, culture, climate.
Some of the top-rated cities in Connecticut offer wildly different lifestyles. West Hartford
is the center of everything, including the state, making it ideal for people who want easy access to a lot of different venues and scenes. Weatogue ranked as the second most popular city in Connecticut, has a rural feel. If you’re looking for great schools in a quiet suburban community, Avon should be at the top of your list. Also, pay attention to other costs of living. What is the commute like? Are there electric vehicle charging stations easily accessible? Will car insurance
cost you more or less based on the city you choose? Buyer’s markets vs. seller's markets
Markets change, meaning there is a good season to buy a house, and a season you’ll have to work a little harder to get the house you want.
A buyer’s market means that there are plenty of houses on the market and sellers might be struggling to sell their houses because of the high supply and low demand. This benefits buyers because it gives you more negotiating power.
A seller’s market, on the other hand, means that there are more buyers than houses on the market. This can put buyers in a less-than-ideal financial position in a tough situation as multiple buyers fight for the same house.
If you’re not sure which market your target city is in, look into recent home sales. Compare the asking price (the list price) to the final selling price. If you see a large gap between the asking price and the selling price, then it’s a seller’s market.
You can also look into how long a house has been on the market. If it’s a buyer’s market, then you’ll see houses on the market for weeks or months. The opposite is true of a seller’s market: houses will sell incredibly quickly.
Find a real estate agent
It used to be that buyers could look on Craigslist, listings in the local newspaper, or other websites, but it’s becoming more and more necessary to rely on real estate agents to help guide buyers through the process of buying a home.
While using a real estate agent isn’t required to buy a home in Connecticut, they can help you find the best deals on homes, and they likely know more about the area you’re looking at than you do (unless you’re moving to a town you grew up in).
Be sure to communicate what you’re looking for. Find someone who actively communicates by answering emails and calls quickly. If they keep recommending you homes that don’t fit your requests, they might not be a good fit for you.
Make an offer
Congratulations! You’ve found your dream home within your budget, and all that hard work is paying off. Now’s the time to pen to paper and make an offer.
Your real estate agent will help you with this process. They’ll explain what paperwork to present, how to negotiate the price, and how to process payments if the seller accepts your offer.
How to save on home insurance
You’ve done all this hard work to set up your finances, research areas, and make an offer. The last thing you’re probably thinking about is home insurance
. But many lenders will require you to present proof of insurance at closing, so expend a little effort for extra protection and savings for years to come. Jerry
makes shopping for home insurance easy (and cheap) by comparing personalized quotes from the top providers. Jerry can also help you find extra savings by bundling your home and auto policies together. “Jerry
was by far the best help I’ve had in I don’t know how long. This is a great app and I will continue to use Jerry for a long time. Nailed it!” –Luke S.
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