3 Best States to Get a Mortgage

It's a good time to buy a home. Many people seem to think so, as mortgage applications for new purchases (as opposed to refinancings) were recently up 3.6% over year-ago levels. Better still, 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%. The Fed has begun raising interest rates and some experts are suggesting that mortgage rates could exceed 6% by 2020.

Image source: Pixabay.

The interest rate you get plays a big part in your satisfaction with your mortgage -- and these days there are great mortgage interest rates on offer in all 50 states. Indeed, according to recent Bankrate.com data, Pennsylvania sported the best rate for a 30-year fixed-rate mortgage, at 3.91%, and the worst state, Kentucky, wasn't that far behind, at 3.99%.

Location, location, location

But there are other real estate factors to consider, too, such as home values. Below, for example, are three states deemed best for getting a mortgage, per the folks at gobankingrates.com -- in large part due to home values:

Mississippi: A key upside to buying a home in Mississippi is the price you'll likely pay. According to Bankrate.com, the median existing home price in the South was recently about $210,000, and Mississippi prices were far lower. The Jackson metropolitan area, for example, had a median price of $165,000, while the Gulfport-Biloxi area was at $124,900. If you buy a home that costs you $140,000, a 30-year fixed-rate mortgage with an interest rate of 4% will leave you with monthly mortgage payments of just $535 or so -- very affordable for most folks and well below what it costs to rent a modest apartment in many regions. 

Image source: Pixabay.

Iowa: Iowa's homes are also generally quite reasonably priced, with the Des Moines area sporting a median single-family home value of $184,300 in the fourth quarter of 2016, the Cedar Rapids area sporting a median price of $150,000, and the Davenport and Waterloo areas both below $130,000. The Des Moines area was named one of the hottest real estate markets for 2015 by Realtor.com -- again due to affordability but also with a nod to low unemployment.

Ohio: Ohio is another state with very affordable homes. Among eight metropolitan regions listed by Bankrate.com, fully six of them sported median  home sale prices of $135,000 or less (some much less). Indeed, the Youngstown region homes had a median price below $90,000. If you buy a $90,000 home in the conventional manner, you'll only have to pay $18,000 down (20%) and you'll face monthly mortgage payments of less than $350. That's less than many people's car-loan installments.

If those states aren't good candidates for you, here are some more, in a list of the 10 states with the lowest median home values, per Zillow:

Source: Zillow.

Make informed choices

Fortunately, right now, and probably for the next year or two, interest rates will remain on the low side, historically speaking. It's smart to figure out just how much home you can afford -- and to buy less than that, in order to leave yourself a 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, their home values, and whether values are rising or falling. Make some smart moves now and you may be able to spend thousands of dollars less.