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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Montana, the average 30-year fixed mortgage rate is 5.59% — up from 2021's historic lows. This raises the average monthly mortgage payment to $2,128 (assuming a 20% down payment at the median home value).
But buying a home in Montana is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Montana with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $92,774 for the typical home in Montana — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Montana want you to contribute 20% of the purchase price as a down payment. That would be $92,774 for a $463,871 home — the typical home value in Montana.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.59% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Montana down payment assistance programs
There are several down payment assistance (DPA) programs throughout the state of Montana to help first-time and low-income buyers afford a home. These programs provide eligible buyers grants or second mortgages to pay for a down payment or closing costs.
Here are a few DPA programs in Montana that you could be eligible for:
NeighborWorks Montana offers amortizing loans and 0% deferred loans for first-time and repeat homebuyers. Based on the individual's needs, the loan can range anywhere from $1,500 to $50,000.
The amortizing loan requires you to make two payments per month, whereas the 0% deferred loan requires no payment until you sell or refinance. Maximum household income limits apply.
Montana Housing Bond Advantage DPA Program
Montana Housing offers its Bond Advantage DPA program to those who qualify for a Regular Bond Program Loan. The financial aid comes as a 15-year amortizing loan of up to $12,500.
Borrowers must have a minimum credit score of 620, complete a homebuyer education course, and contribute at least $1,000.
Montana Housing Plus 0% Deferred DPA Program
The Montana Housing Plus 0% Deferred DPA program offers eligible buyers a 0% second loan with no monthly payments. Borrowers can receive up to 5% of the sales price or a maximum of $10,000, and payments aren't due until the property is refinanced or sold.
To qualify, you must have a minimum credit score of 620 and not exceed the maximum debt-to-income ratio of 43%. Borrowers also need to complete a homebuyer education course and contribute at least $1,000.
U.S. Department of Housing and Urban Development
A list of alternative programs in Montana can be found on the state's HUD page here.
Step 2: Find a great real estate agent in Montana
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Montana.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Montana will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Montana home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Montana is $463,871, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Billings:
Home value appreciation in Billings
Step 5: Start house hunting in Montana
🔑 Key takeaway:
It’s a strong market in Montana, so hunting for a house may be a bit of a challenge. While the increasing inventory gives you some options, you may have to re-evaluate your priorities when hunting for a house because of the spike in listing prices. If you’re set on buying a house in Montana, be open to the listings that your realtor suggests. Even if it doesn't meet all your expectations, you may still find a house worth considering.
Searching for homes in Montana is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Montana can have a big impact on your number of options. For example, in Montana, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Montana. Historically, there are 60.9% fewer homes for sale than during Montana's peak season.
Housing inventory in Montana by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
🔑 Key takeaway:
Montana’s market is quite active, and there are barely any listings left at the end of each month. Given that, you may find a lot of competition when you find a decent listing in the state. To up your chances of grabbing the seller’s attention, work out all your options for concessions and contingencies with your agent and know what your max budget is. That way, you can come up with a strong offer that’s competitive while still keeping it reasonable for you.
Once you find a Montana house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Montana, homes stay on the market for 95 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Montana homes sell fastest in June, where the average property is only on the market for 67 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in February, you have a bit more time to search. Homes typically stay on the market 35 days longer than Montana's annual average.
Average time homes spend on market in Montana
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Montana
Having your Montana home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Montana is known as a "buyer beware" state, so homebuyers are recommended to take extra precautions before closing on a property. In addition to getting a general home inspection, buyers are advised to complete more specific tests to identify all potential issues.
Here are a few highly recommended tests to consider:
- Radon testing: Radon is a harmful substance that can enter a home undetected. If a seller hasn't tested for radon in the past year, consider running a test to ensure that the home is safe.
- Pest inspection: Termites and other unwanted pests can cause property damage and pose health hazards to homeowners. Even if your lender doesn't require you to have a professional pest inspection done, it's a good idea to do one anyway.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
Closing on your Montana home will require you to complete some paperwork and settle your closing costs at the title company.
On the closing date, you'll begin by reviewing and signing several legal documents. Expect to spend about an hour working through the paperwork, which will include:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
After completing your paperwork, you'll need to pay your closing costs. The title company will collect the total amount you owe, and then they'll distribute these funds to the correct recipients.
Although the title company will take care of paying your various service providers, your closing costs can be divided into four categories:
- Lender fees: Fees paid to your mortgage lender for preparing your loan. Sometimes, other costs related to your loan may be added here, such as appraisal fees and survey fees.
- Title and escrow charges: Fees paid to your title company for facilitating the closing process, performing the title search, and providing title insurance.
- Prepaid costs: Ongoing homeowner expenses. Most lenders require borrowers to pay for specific fees up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous expenses that are unique to each buyer. Some common fees may include natural disaster certification fees or real estate attorney fees.
Buyers in Montana typically pay 3–5% of the purchase price in closing costs. For a $463,900 home — the typical home value in Montana — that's between $13,917 and $23,195!
Frequently asked questions
Montana does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Montana neighborhoods
- Partner with the right real estate agent in Montana
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, Montana Housing offers its Regular Bond Loan Program and its 80% Combined Program to first-time homebuyers. Buyers with Montana Housing first mortgages may also apply for down payment assistance.
The Regular Bond Loan is a standard 30-year, fixed-rate loan with a low interest rate. The 80% Combined Program offers a 30-year loan at an 80% loan-to-value ratio combined with a second loan at a 20% loan-to-value ratio.
Qualified applicants must meet the household income and home purchase price limits set for their county. Borrowers will also need to meet the eligibility criteria for an FHA, VA, RD, or HUD 184 loan and complete a homebuyer education course.
Why trust us?
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Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.