How to Finance an Out-of-State Property

The time-tested mantra of “real estate is local” simply means that while homes are bought and sold every day, one market may be seeing higher valuations while in other areas, home values might be doing the opposite, for the very same type of properties. A four-bedroom 2 ½ bath in one neighborhood might be going for $300 per square foot while across the county another similar four-bed, 2 ½ bath single-family home is listed at $150 per square foot. So what happens when you want to finance an out-of-state property?

Why Out-Of-State Properties

There can be many such as location, age of the property, local school districts, access to parks and recreation…all of these can affect value. Working with your real estate agent, you’ll get a firm idea on home prices in different parts of town, state or across the country. This certainly holds true not just in your local neighborhood but also properties that are located out of state.

It’s relatively easy to check out a home across town. You and your agent can do some research on different homes for sale and once a few candidates are identified, all that is needed next is to take a personal visit and inspect the home. But what if the property isn’t across town? What if the property isn’t even in the same state? There are various reasons why someone would want to buy an out-of-state property located in a different time zone.

One obvious reason might be a transfer is pending and the buyers want to have a home to move into once the move takes place. Maybe buying an investment property near a university for to generate monthly cash flow. Or, real estate values might have fallen  in a particular area that it might be a good time to buy low, hold and sell high later on down the road. But what are the mechanics involved as it relates to lining up financing for an out-of-state property?

Financing an Out-of-State Property

First, this isn’t something you should be doing on your own. Some mortgage lenders, even one or two that you’ve worked with before, may not be licensed in the state you’re exploring.  That’s the first challenge. Next, you’ll need to locate a few prospects and once you’ve found enough to schedule a trip to the new state for a personal visit, before you leave you want your financing in hand. You don’t want to buy a plane ticket, book at hotel only to discover the sellers want to see your preapproval letter which you don’t have. Or maybe you do have a preapproval letter, but the lender isn’t licensed to finance homes where you want to buy.

You need someone with experience lending in the state where you’re looking. This experience leads to introductions to local real estate experts from inspections to schools to real estate trends. I’ve placed loans in virtually every state up and down the West Coast as well as other areas in the country so can help here with financing for out-of-state properties.

What’s Next

Let me know where you want to buy. I can help provide referrals for professionals in the area where you want to move. This isn’t the time to pick up the phone book or an extended internet search for industry professionals you’ve never met. Once you’ve identified the area, we’ll next begin your personal preapproval. This means providing tax returns and paycheck stubs and bank statements, essentially the very same items you need when you bought your current home. Your real estate agent should also have a branch in the area you want to buy. This provides you with a real estate professional introduced with a personal referral. This new portal then introduces you to trusted third parties needed to complete your purchase transaction.

If you’re getting ready to buy an out-of-state property, there are a few more hurdles to negotiate, but again don’t try this on your own. Tell me what you want to do, and I’ll get the wheels moving and get your preapproval issued while monitoring your transaction from offer to close.