Personal Finance

5 Best States to Get a Mortgage

Map of much of the USA, with a few push pins stuck in it

It's a good time to buy a home. According to the Mortgage Bankers Association, getting approved for a home loan is easier than it has been at any time in this past decade, with lenders recently approving 77% of loans, up from 71% in mid-2015. On top of that, interest rates are still extremely low, historically speaking.

You might want to act relatively quickly, though, as interest rates have inched up recently and seem likely to continue doing so over the coming years. Rates for 30-year loans hit a nearly three-year high of 4.32% in December, and were recently around 4.27%.

Map of much of the USA, with a few push pins stuck in it

Image source: Getty Images.

Location, location, location

The interest rate you get plays a big part in your satisfaction with your mortgage -- but there are other real estate factors to consider, too. Below, for example, are five states deemed best for homeowners by the folks at valuepenguin.com. They arrived at their results by assessing factors such as a housing market strength, costliness of home maintenance, local crime rates, and insurance rates (along with chances of calamities). These winners are more rural, overall, contributing to lower crime rates and some lower costs.

Rank State Homeowner Score (out of 100)
1 Iowa 83
2 South Dakota 81
3 Wyoming 79
4 Nebraska 78
5 Maine 77

Source: valuepenguin.com.

Tax tolls

Another key consideration as you mull becoming a homeowner in certain locations is the property tax hit you'll face. Here are the five states with the lowest effective property tax rates:

State Effective Real State Tax Rate Recent Median Home Value Estimated Tax on Median Home
Hawaii 0.28% $504,500 $1,405
Alabama 0.43% $123,800 $538
Louisiana 0.48% $140,400 $672
Delaware 0.53% $232,900 $1,231
South Carolina 0.57% $137,600 $790
District of Columbia 0.57% $454,500 $2,601

Source: WalletHub and data from the U.S. Census Bureau.

Of course, a low property tax rate isn't enough. If home values are steep, even a low rate can leave you facing a big bill. Compare Hawaii and Louisiana, for example. Hawaii's tax rate is close to half of Lousiana's, but Louisiana's far less expensive homes will have most homebuyers paying significantly less in taxes.

The question "how much can you save?" written and circled in red

Image source: Getty Images.

Make informed choices

Fortunately, right now, and probably for the next year or two, interest rates will remain on the low side, historically speaking -- even in those states with above-average interest rates.

It's smart to figure out just how much home you can afford -- especially because your tax bill will be based on the home's value. It can be tempting to go big, but doing so can leave you with little margin of safety in case you or a spouse loses a job or your household faces some major unexpected expenses. Also, once you decide that you're ready to make an offer as soon as you see a home you want, it's helpful to get pre-approved for a mortgage. That can make you a more competitive buyer.

So go ahead and take advantage of low interest rates for mortgages -- which currently exist in all 50 states -- but also consider other aspects of homes you consider, such as their location and their tax rates. Make some smart moves now and you may be able to spend thousands of dollars less.

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