Buying a home in North Dakota can be challenging, whether you’re a first-timer or a seasoned pro. Dozens of factors can impact the outcome, from the real estate market to your credit score.

Luckily, the more you know about the steps and requirements, the better you can navigate your options.

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Figure out your finances

If a new home is in your future, you need to understand your finances clearly. Everything from your credit score to your ongoing expenses can impact your buying options—and until you have all your financial ducks in a row, it doesn’t pay to start looking.

Before you head over to Realtor.com, make sure you have these things in shape:

Credit score: Most traditional loans require a score of at least 620

Debt-to-income ratio: your monthly payments should generally not exceed 36% of your income.

Down payment: for a conventional mortgage, you’ll need a down payment of at least 20%.

Closing costs: the buyer usually must pay 2-5% of the home’s price in closing costs out-of-pocket.

Check your credit score

With modern technology, checking your credit score is easy. But, it’s important to know the minimum credit score you need to qualify for a mortgage.

While every lender is different, your credit score will ALWAYS impact your chances of getting a mortgage. Generally speaking, for a conventional loan, you’ll need a score of at least 620.

You may be able to qualify through some lenders with a score as low as the 500s, but you’ll likely pay much higher interest rates.

Calculate your debt-to-income (DTI) ratio

Your debt-to-income ratio is all your monthly expenses divided by your income—and it’s an important factor in buying a home. Lenders don’t want to lose money, so they need to make sure you’ll be able to make your mortgage payments.

Factors mortgage lenders will look at include:

Minimum credit card payments

Auto loans

Alimony or child support

Student loans

Personal loans

An estimated monthly mortgage payment

The higher your DTI, the less likely you’ll be able to secure a mortgage—in most cases, it’s best to keep it under 36%.

Pro Tip Mortgage lenders don’t look at little expenses, like gas and groceries, but those are things you should consider! Take a look at your finances and make sure you’ll be able to afford ALL your bills.

Determine your down payment

Most conventional mortgage loans require a down payment—and it can be a sizable chunk of cash. For a traditional loan, count on payment of at least 20% of the cost of the home.

For a $250,000 home in North Dakota, you’d need $50,000 upfront.

If you can’t make a 20% down payment, you may have other options. Government-backed loans, like FHA and USDA loans, typically have lower down payment amounts. For example, the usual down payment on an FHA loan is 3.5%, while a USDA loan doesn’t require a down payment at all.

Prepare for closing costs and other fees

Many people fail to consider how much closing costs can add up to when determining a home-buying budget. Typically, the buyer pays most of these expenses (including title searches and appraisal fees) out-of-pocket.

In total, closing costs can run between 2-5% of the purchase price of a home.

Other fees may include:

Any lender costs

Attorney fees

Government recording fees

Credit report fees

Mortgage insurance

Any applicable taxes

Of course, closing costs and fees will vary depending on your lender and the contract you work out with the seller.

MORE:

10 best companies for home and car insurance

Key Takeaway: There are many down payment assistance programs in North Dakota to help low-income buyers afford a house. These programs are usually either government grants or second mortgages with deferred or forgiven payments.

Look for homeowners insurance

Most mortgage lenders will require you to secure homeowners insurance before closing. This is to safeguard their interests and yours—if something were to happen to your new home, and you weren’t insured, the bank would lose a lot of money.

Even if you already have an insurance company you like, it’s essential to research various options. You want to find a policy that offers all the necessary coverages at the best value.

Once you find one that suits your needs, run it by the lender to ensure it meets their requirements.

You should sign the contract and get proof of Insurance before heading to closing. If you show up at the table without the necessary paperwork, it’s likely your timeline will get pushed back.

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MORE:

10 questions to ask a real estate agent when buying a house

Key Takeaway: Whenever you’re getting a new insurance policy, whether it’s for auto or home, shop around for the best coverages at the best rates.

Get preapproved for a mortgage

Don’t wait until you’re ready to put in an offer on a home to get approved for a mortgage. Worst-case scenario, you miss out on the home of your dreams while you’re bogged down in paperwork.

Pre-approval is a smart idea for this and several other reasons:

Once you start looking, you’ll know what houses fall within your budget

When you find a house you love, you’ll be able to put in an offer immediately

It shows the seller that you are serious about buying

Being pre-approved can help you catch any snags (like credit report errors) before you go under contract

Most importantly: many sellers won’t even show you a house if you don’t have a mortgage pre-approval letter. They don’t want to waste their time with someone who isn’t serious about buying, or who might fall through after financials are run.

Luckily, getting pre-approved is easy and generally takes less than an hour.

How to pick the right mortgage in North Dakota

Many factors go into choosing the right mortgage, from considering your financial situation to selecting the best lender. But picking the best mortgage in North Dakota largely comes down to two things: mortgage term and interest rate.

The most common mortgage terms, or length of time you’ll pay, are 15 years and 30 years.

Longer mortgage terms come with lower payments, but you’ll typically pay a higher interest rate (around 3.5% annually). Shorter mortgage terms come with higher payments but a lower interest rate (2.5% or lower, typically). In the long run, you’ll pay less money overall with a shorter-term mortgage.

Look for a house

Buying a house is a huge commitment—as of 2021, the median duration of homeownership in the U.S. was 16 years. But just because it’s serious doesn’t mean it can’t be fun! This is what you should keep in mind on your hunt for the perfect home:

Pick your city or neighborhood

Before looking at houses, decide which neighborhoods or cities meet your needs regarding lifestyle, home value, education, and more.

The neighborhood you live in can impact your life just as much as your home, from where you go out to eat to where your kids can play.

Looking at the average home value and historical trends in each area can help you determine if a neighborhood falls within your budget. In general, though, North Dakota offers very reasonable home prices overall.

As of 2021, the median home price in Harvey, North Dakota’s most affordable city, was just $129,000.

MORE:

How neighborhood affects home insurance rates

Buyer’s market vs. seller’s market

Buying your new home in a buyer’s market vs. a seller’s market can make a big difference in price and concessions.

In a buyer’s market, supply exceeds demand. That means there are more houses for sale than people to buy them.

In a seller’s market, demand exceeds supply. So, more people want to buy homes than there are homes available.

In a buyer’s market, you’ll have more leverage over sellers and may be able to negotiate a lower price and better concessions, such as repairs made before purchase.

As of the start of 2022, North Dakota is in a buyer’s market—although home prices have been trending up. This could mean that things are going to change soon!

Find a real estate agent

In North Dakota, it is required for a real estate agent to be a part of every home sale.

As a buyer, they will be your most important ally. Not only will your agent show you homes, but they’ll also make recommendations for other services such as attorneys, title agents, and mortgage lenders.

Most importantly, they’ll help you negotiate an excellent price for your future home.

Take the time to interview different agents and find someone you like. Pay attention to things like years of experience, price range, and online reviews.

Make an offer

Once you find your dream home, it's time to make an offer. In a buyer's market, you have more leeway, but you have to work to make your offer more attractive in a seller's market.

Generally, in North Dakota, the real estate markets are busiest in spring and fall, but they can change fast. So if homes are getting snatched up quickly, you may have to make an offer sooner than anticipated.

If in doubt, talk to your real estate agent: they can tell you when and how much to offer to remain competitive. If you've done the background work and have your paperwork ready, you should be able to move fast.

MORE:

A step-by-step guide on how to get a mortgage

How to save on homeowners insurance

Homeowners insurance is a major expense. And depending on the size of the home you want to buy and your insurance company, the premium can vary by hundreds of dollars.

One of the best ways to save is by bundling your auto and home insurance together.

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How much money do I need to buy a house in North Dakota?

According to

Zillow

, the median price for a single-family home in North Dakota is $259,960, which is lower than the national average. Prices, however, are on the rise and went up more than 9% from December 2020 to December 2021.

What credit score is needed to buy a house in North Dakota?

Like most other places, you’ll need a credit score of at least 620 to buy a home in North Dakota. However, you may qualify for some government programs or low-income loans with a score in the 500s.

What is the best place to buy a house in North Dakota?

You can’t go wrong buying a house in North Dakota. Residents love the friendly atmosphere and helpful neighbors no matter where they live. That being said, places like Valley City and Watford City experienced large population booms in the last year while also staying reasonably priced.

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