Buying a home in Montana is a significant milestone. While incredibly rewarding, it requires serious planning and preparation. Whether you’re a first-time homebuyer, moving someplace new, or purchasing property as an investment, getting your financial foundation in order will make it easier to qualify for a better loan and get under contract on your dream home. We’ve put together a list of our banking tips to help you start navigating the home buying process with confidence.

Banking Advice to Follow Before Buying a Home in Montana

1. Know your Budget

It’s common to ask how big of a loan you qualify for. But the better question is, how much home can you afford? A homebuying budget is more than just a monthly mortgage payment. It includes factors like ongoing costs, potential expenses, or income changes down the road.

The total monthly mortgage payment includes four components that are known as the PITI:

  • Principle — this goes directly toward paying down the loan amount you borrow to purchase your house.
  • Interest — the rate charged by creditors for lending you the principal. Interest can be fixed or variable.
  • Taxes — your property tax.
  • Insurance — lenders typically require you to have homeowner’s insurance to protect their interest in your property.

To estimate your homebuying budget, calculate your debt-to-income ratio by dividing your total monthly expense by your gross monthly income. The 28% rule is an excellent place to start. A common-sense guideline that states a household should spend no more than 28% of monthly income on your PITI, or housing costs. It can help ensure that you don’t have to significantly change your everyday lifestyle to make your mortgage payments. For an extra hand calculating your monthly mortgage payment, try out our mortgage calculator.

2. Save for a Down Payment

A down payment is the initial money you pay in full when purchasing a home. The size of your down payment in proportion to the total value of your new home will impact how much you pay in interest and monthly mortgage payments. The typical down payment is around 20% of the total purchase price, although it’s not uncommon to qualify for a loan with a much smaller down payment amount. Some home loans, such as VA loans, USDA loans, and FHA loans, have low or even no down payment requirements. Your credit history also plays a role in your loan rates and downpayment opportunities. A local bank loan with Bank of Bozeman can provide you with some of the best rates and options.

As of June 2022, the median down payment for a single-family home in Montana is around $85,659. Saving for a down payment could be as simple as putting away money each month into a savings account. While investing may seem attractive for growing that nest egg, market volatility makes a high-yield savings account, money market account, or certificate of deposit a more prudent option for preserving your principle while limiting downside risk.

If you need help, Montana offers several Down Payment Assistance Programs for qualified buyers. It may also be possible to borrow the entire amount of the down payment. The Bond Advantage Down Payment Assistance Program can help with up to $12,500 of down payment and closing costs, and the MBOH Plus 0% Deferred Down Payment Assistance Program offers buyers up to $10,000. Both programs have unique advantages, terms, and eligibility requirements. Our team of professionals at Bank of Bozeman can help you learn about your best options.

3. Make the Most of Your Budget

While your homebuying budget may be somewhat fixed, identifying your needs versus wants gives you control over the details that will make your purchase a success. This exercise categorizes need-to-have and nice-to-have aspects of any prospective purchase, and what goes into each list will look different for every individual and family. Safety, parking, heating, a solid foundation, and enough bedrooms? These are likely on your need-to-have list. Tile floors, vaulted ceilings, and a white picket fence? Maybe nice-to-haves. By differentiating those two categories before starting your search, you can avoid purchases driven by emotion over practicality, nix homes from your list that aren’t a good fit, and make it easier to say “yes” when the right house comes along. This is advantageous in a swift-moving housing market.

4. Consider the Best Place to Buy a Home in Montana

Choosing the best place to buy depends on your budget and investment goals, as well as how you want to live. Do you enjoy the amenities in growing cities with hot real estate markets? Or do you prefer a quieter community, a simpler, more affordable lifestyle, and a lower mortgage payment?

If you’re looking for a new place to start a business, raise a family, or recreate outdoors, the energetic status of the market indicates many people consider Bozeman one of the best places to buy a home in Montana. Bozeman’s real estate is currently quite competitive on the buying side, with locals and newcomers alike vying for the houses, condos, and lots both on and off the market. The neighboring communities of Belgrade, Manhattan, Three Forks, Livingston, and Ennis each offer unique charms, amenities, and opportunities. With homes priced slightly lower on average than in Bozeman, they are great places to invest in property and put down roots. Should you widen your home buying search, the entire state of Montana is truly a wide-open landscape with towns and cities to suit a diversity of interests and ways of life.

Before you apply for a mortgage loan or for pre-approval with our friendly Bozeman lenders, it’s good to be familiar with the details of your financial picture and take steps to prepare. To get started, we recommend exploring this list of seven things to do before applying for a mortgage.

Partner with Our Bozeman Lenders

Our Bozeman lenders can help you identify your financial strengths and best opportunities and help improve your financial status in key areas. No matter what route you choose, our goal is to help you qualify for the best possible mortgage. With ideal terms, good rates, a down payment at the ready, and pre-approval in your back pocket, you’ll be poised to create an attractive offer for sellers. If you’re ready to get started on buying a home in Montana or are looking to learn more about local bank loans, our team of lending professionals is ready to help. Reach out to us today or give us a call at (406) 587-5626.