Buying a house in Rhode Island is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.
For example, homes in Providence are hitting the market at $435,000 and selling within 53 days — 20 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.
However, homes typically stay on the market longer in Providence, so you'll be able to take your time and potentially find a better deal.
The more you know about the steps to buying a house and Rhode Island's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.
No matter where you are in your home buying journey, Clever's concierge team can connect you with local real estate pros who will help you purchase your Rhode Island dream home!
The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!
Step 1: Save for a down payment
Your down payment is the initial portion of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Rhode Island want you to contribute 20% of the purchase price as a down payment. That would be $82,038 for a $410,188 home — the typical home value in Rhode Island.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum Down Payment (%)
Down Payment ($)
Based on typical home values from Zillow (February 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 a $410,188 home, the typical home value in Rhode Island (Zillow, February 2022) with a 3.20% 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.
Rhode Island down payment assistance programs
Do you need some help affording a down payment?
The state of Rhode Island offers several down payment assistance (DPA) programs for first-time and low-income homebuyers. If you are eligible, you could receive financial aid to pay for closing costs or a down payment.
Here are a few options for Rhode Island residents that you may qualify for:
RIHousing 10kDPA Program
RIHousing's 10kDPA Program provides a loan of $10,000 to first-time homebuyers who also have a RIHousing first mortgage. The loan requires no monthly payments and accrues no interest. Payment is only required when the property is sold, is no longer the buyer's primary residence, or the title is transferred.
All borrowers must have a minimum credit score of 660 and complete a homebuyer education course. Household income and home price limits apply and vary by county.
RIHousing Extra Assistance Program
RIHousing's Extra Assistance Program offers a second mortgage of up to $15,000 to first-time homebuyers with a RIHousing first mortgage. The interest rate of this mortgage will be the same as the first mortgage.
To qualify for this program, buyers must have a minimum credit score of 620 and complete a homebuyer education course. Household income and home purchase price limits apply and vary by county.
U.S. Department of Housing and Urban Development
HUD’s list of alternative programs in Rhode Island can be found here.
Step 2: Get pre-approved for a mortgage
A mortgage pre-approval 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 Rhode Island will require pre-approval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and pre-approval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Rhode Island home.
Get Pre-approved Today!
Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?
To get a pre-approved for a mortgage, you'll fill out a mortgage application and provide details about your financial situation. They'll look at the following information to determine your mortgage pre-approval amount:
Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.
Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.
While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.
Because of this, you might consider paying off some of your other debts before applying for a mortgage in Rhode Island.
Mortgage lenders in Rhode Island want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.
While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.
Step 3: Choose the right location
A house's neighborhood can be just as important as its layout and features. In general, you should consider the following factors when deciding which neighborhood is best for you:
What's your home buying budget?
Once you know your budget (a pre-approval letter will tell you the most you can expect to borrow), you can narrow your search to neighborhoods where homes are selling within your price range.
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. You want to choose a neighborhood that's in your budget, but could also lead to a big return when you decide to sell.
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 Providence:
Home value appreciation in Providence
Once you have a list of neighborhoods with homes in your budget, you should evaluate how well each one meets your personal needs and preferences. To finalize your list of target areas, consider factors like:
- School districts
- Your daily commute
- Crime rates
- Restaurants and amenities
- Transportation options
Step 4: Find a great real estate agent in Rhode Island
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent should be an expert on buying a home in Rhode Island.
They'll 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 Rhode Island.
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
Ask each of them questions about your target neighborhoods, how they prefer to communicate, and their strategy for helping you find and close on your new home. You should feel comfortable with the agent's knowledge, experience, and process before committing to an agent.
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Step 5: Start house hunting in Rhode Island
Searching for homes in Rhode Island 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.
Prioritize your needs vs. wants when buying a home in Rhode Island
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 Rhode Island can have a big impact on your number of options. For example, in Rhode Island, May 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, January gives you the fewest choices in Rhode Island. Historically, there are 45.1%) fewer homes for sale than during Rhode Island's peak season.
Housing inventory in Rhode Island by season
New Listings per Month
Based on January 2022 data from Realtor.com
Step 6: Make an offer
Once you find a Rhode Island 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 Rhode Island, homes stay on the market for 55 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Rhode Island homes sell fastest in June, where the average property is only on the market for 43. 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 January, you have a bit more time to search. Homes typically stay on the market 20 days longer than Rhode Island's annual average.
Average time homes spend on market in Rhode Island
Based on January 2022 data from Realtor.com
What should your offer include?
Your real estate agent can help you decide which of these common options you should include in your offer:
- Seller concessions: You'll have to pay for most of your closing costs out of pocket when you buy a home, but you may be able to ask the seller to cover some of those costs for you. This option may allow you to offer a higher purchase price and essentially include your closing costs in your mortgage.
- Repair credits: If the home is in need of repair, you could ask for credits instead of having the seller make and pay for the repairs. The seller avoids the hassle of waiting for contractors to complete the job, and you get to oversee the repairs in the future to make sure they meet your expectations.
- Inspection contingencies: Most purchase agreements have inspection contingencies that allow you to change your offer (or back out all together) if the inspection turns up major problems. If you have a high degree of certainty about the house's condition (like if the seller can show you a recent inspection report), you can forgo this contingency to give the seller a higher sense of confidence.
- Letter to the seller: Many sellers have a personal attachment to the home. They've lived there for years and want to know the next owner will take care of the property. Writing a letter to the seller can show them how you picture your life in the house and appeal to their sentimental side.
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.
Home inspections in Rhode Island
Having your Rhode Island 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.
Rhode Island-specific inspections
Rhode Island has strict disclosure laws for sellers, but it's still wise for buyers to conduct thorough testing before closing on a home. In addition to a general home inspection, buyers are strongly encouraged to have the following tests completed as well:
Radon testing: Some areas of Rhode Island can have elevated levels of radon, which can pose health risks to anyone living in the region. If the seller hasn’t had a radon test performed in the past year, consider ordering an inexpensive radon test kit from the American Lung Association.
Pest inspection: Although pest inspections aren't always required by lenders, it's still a good idea to have a professional check a home for unwanted critters. Termites and other pests can cause structural damage and pose health hazards to your family, so it's essential to find infestations before they do serious harm.
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.
Step 8: Close on your new home!
Once you finish your inspections and your lender approves your financing, you'll be ready for closing! Closing is the process of finalizing your mortgage and transferring ownership of the property.
On closing day, you'll have two final steps before becoming a Rhode Island homeowner. First, you'll meet at the title company to finish some paperwork. Next, you'll settle your closing costs.
Plan to spend about an hour reviewing and signing documents for the title transfer and loan. This paperwork is essential for a seamless title transfer, so be sure to check that all of the information is correct before signing anything.
A few important documents will include:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
After you finish the paperwork, you'll settle your closing costs. The title company will collect the total amount you owe and distribute the funds to the correct recipients for you.
If you're wondering what your closing costs actually entail, you can usually break them down into four categories:
- Lender fees: Fees your lender charges for originating and underwriting your loan. Your lender fees might also cover other costs associated with your mortgage, such as appraisal fees or survey fees.
- Title and escrow charges: Fees the title company charges for conducting the closing process. Buyers and sellers often split this cost.
- Prepaid costs: Ongoing costs of owning a home. Some mortgage lenders require their borrowers to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous expenses that are unique to each buyer. Some other closing costs can include natural disaster certification fees or real estate attorney fees.
Buyers in Rhode Island typically pay 3-5% of the purchase price in closing costs. For a $410,200 home — the typical home value in Rhode Island — that's between $12,306 and $20,510!
Frequently asked questions
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Rhode Island neighborhoods
- Partner with the right real estate agent in Rhode Island
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes! RIHousing’s First-Time Homebuyer Loan offers 100% financing options for people working with participating lenders. The program can also be used in conjunction with the Extra Assistance loan, which can offer up to $15,000 for down payment costs.
There are household income and home purchase price limits for these programs. Eligible households with 1 to 2 people must not earn more than $99,730 annually. Households with 3 or more individuals cannot earn more than $114,689 per year.
The maximum home purchase price for the entire state is limited to $492,201. If accepted into the program, participants must take a homebuyer education course.