can be an attractive state to call home with the cost of living below the national average, breathtaking pine forests to the north, beautiful bayous in the south, and an overall laid-back vibe.

However, if you’re new to the Louisiana real estate market—or have never bought a house before, the home buying process can be confusing.

Don’t worry! Car insurance and broker expert

Jerry

is here to answer all of your questions about buying a house in Louisiana! In this buyer’s guide, we’ll walk through the steps to buying a home, with a particular focus on things every Louisiana homeowner needs to know.

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Figure out your finances

The most crucial step to buying a house in Louisiana is figuring out your finances and how much you can afford. You can't begin hunting for your dream home until you understand your credit score, debt-to-income (DTI) ratio, and all of the other payments and fees associated with buying real estate.

Instead of scrolling through Zillow, pull out a calculator, pull up your bank statements, and other financial records to calculate what you can afford in Louisiana.

Check your credit score

Check your credit score before you do anything else—your credit score may be the most important financial figure in the home buying process.

To buy a home with a conventional mortgage in Louisiana, you need a credit score of at least 620. If your score is higher, you could be eligible for lower interest rates.

If your credit score is below 620, there are still options.

You can try to build your credit to qualify for a better mortgage. This may be the best option if you are saving up for a downpayment. That said, you can still be eligible for a mortgage with a lower credit score.

The Federal Housing Administration (FHA) and Veterans Administration (VA) offer mortgages for homebuyers with credit scores as low as 523 and 500, respectively. Note: a VA mortgage is only available to veterans and active service members.

Calculate debt-to-income (DTI) ratio

Your debt-to-income (DTI) ratio is another important financial figure. To calculate your DTI, you need to add up your monthly payments and divide them by your pre-tax income. An example of payments that count towards your DTI include:

Rent or house payments

Car payments

Credit card payments

Student loan payments

Alimony or child support

You’ll want to shoot for a DTI at or below 36%. If your DTI is above 50%, you’ll have a hard time getting approved for a mortgage in Louisiana.

Determine your downpayment

Determining how big a downpayment you can make will play a significant role in what kind of house you can afford. Like most home-buying decisions, this hinges on the type of mortgage you expect to get. You normally need a downpayment of 20% or more when buying a home with a conventional mortgage.

If you can’t make a 20% downpayment, A federal Housing (FHA) loan or Veterans Administration (VA) home loan may be a better option for you. Here’s a breakdown of the differences between the two:

FHA loan: A mortgage insured by the Federal Housing Administration for low- and moderate-income homebuyers (especially first-time homeowners)

VA home loan: A mortgage insured by the Veterans Administration for servicemembers, veterans, and eligible surviving spouses

If you qualify for a VA loan, you can have competitively low interest rates and lower closing costs. Plus, you may not be required to make a downpayment at all! If your credit score is at least 580, you can make a downpayment as low as 3.5% with an FHA mortgage.

Prepare for closing costs and other fees

You’ve likely heard about “closing costs,” but how much do you need to pay on top of your downpayment?

Closing costs in Louisiana are usually 2-5% of the home’s total value. According to Zillow’s

Home Value Index,

the average home value in Louisiana is $201,414—closing costs could be as high as $10,071!

What does this total include? Usually, your closing costs will cover:

Home appraisal (required by most lenders) fee

Credit report fee

Home inspection fee

Mortgage origination fee

Earnest money (i.e., a good-faith deposit that will go towards your down payment)

Mortgage insurance

Property taxes

Homeowners insurance

In Louisiana, property taxes are a generous 0.53% of the property value. Taxes vary from parish to parish, with Tammany Parish as high as 0.81% and St. Landry Parish as low as 0.25% per year.

Louisiana has such low property taxes because of the homestead exemption that reduces the taxable value of owner-occupied properties by $7,500.

Key Takeaway Check the property tax rate in the county where you’re hoping to buy a house before you begin to get an understanding of how those fees will add up each month.

MORE:

Questions to ask your home inspector when buying a house

Look for homeowners insurance

Homeowner’s insurance is an expense you’ll keep paying long after you close. In the US, the average cost of homeowners insurance is $1,387 per year or $115 per month. The cost may be higher in Louisiana because you may also need to buy flood insurance on top of your standard

homeowners policy

When it comes to getting insurance coverage for your home, it pays to shop around—don’t just buy the first policy you find! You should compare rates from at least three insurance companies to find the lowest rate (hint: you can usually find the lowest rate from your

car insurance

company).

Insurance broker super app

Jerry

can make the comparison process easy: just enter your information, sit back, and let Jerry find you quotes from up to 50 top companies!

Key Takeaway Evaluating your finances is a non-negotiable first step to buying a house in Louisiana. Calculate your credit score, DTI, and savings for a down payment and closing costs before you move any farther.

MORE:

How to buy flood insurance and file a flood insurance claim

Get preapproved for a mortgage

Now that you know where your finances stand, you need to get prequalified for a mortgage before you can begin looking at properties. Not only will this give you an going into negotiations, but many sellers won’t let you do a walk-through without a pre-approval letter.

Here’s how to get preapproved for a mortgage:

Provide the lender with your Social Security number

Create a list of all banking information, employment history, assets, and debts

Fill out a mortgage application

The prequalification process is pretty cut and dry, but don’t start until you’re ready to buy! Your lender will use your provided information to do a hard credit check to verify your DTI and your ability to repay the loan. If you apply for preapproval before you’re financially ready, that credit check could damage your credit score and make it harder to get approved later!

How to pick the right mortgage in Louisiana

When you’re ready to pick a mortgage, you should consider interest rates and mortgage terms. The two most common mortgage terms are 30 years and 15 years.

The benefit of longer mortgage terms is lower monthly payments. However, you’ll have a higher interest rate (around 3.5% on average). On the flip side, a 15-year mortgage will have higher monthly payments with interest rates of about 2.5% or less. Before making your final decision, compare loan offers from a few lenders.

Look for a house

Finally, the moment you’ve been waiting for! You’ve studied your finances, prequalified or mortgage—you’re all set to start searching for that dream home!

Pick your city or neighborhood

Look for a city that meets your needs and interests regarding the cost of living, culture, and climate. The real estate market is on fire in

New Orleans

Natchitoches

, and

Ruston

If you’ve fallen in love with a specific city, it's a great idea to study the housing market in different neighborhoods. Think about what is important to you: living close to a thriving nightlife with clubs and bars, or a house near good schools? You should also look at local crime rates and the cost of

car insurance

MORE:

How to get a mortgage

Buyer’s market vs. seller’s market

Shop smarter for real estate by knowing if you are in a buyer’s or a seller’s market.

In a buyer's market, supply outweighs demand, and you may be able to negotiate a lower price.

You’re in a seller’s market if there are more prospective buyers than houses on the market.

You can quickly determine which market your chosen area is in by looking at recent home sales. Compare the asking price to the final sale price; if you see that the asking price is considerably lower than what buyers ended up paying—-it's a seller’s market.

Time on the market is another metric to consider: houses may be listed for weeks in a buyer's market. In a seller’s market, they get snatched up quickly.

As of the final quarter of 2021, most of Louisiana was a seller’s market, with homes receiving multiple offers and selling quickly above the asking price. That said, markets can shift quickly, so do your research when you begin house hunting.

Find a real estate agent

Buying a house is a lot of work—-it helps to have some professional help. Hiring a real estate agent isn’t required to buy a home in Louisiana, but doing so can help the process go smoother—especially if you live out of state.

Look for an agent with considerable experience in the neighborhood you’re interested in. Don’t work with someone who won’t get back to you—hire an agent that communicates promptly.

Make an offer

You’ve found the perfect house, now’s the time to make an offer! Your real estate agent can help you fill out all the paperwork and determine the best offer based on the market. If you’ve done your homework, you’ll be ready to make the required payments and move forward with the sale!

MORE:

Questions to ask your real estate agent when buying a house.

How to save money on homeowner’s insurance

Home insurance could be the least exciting part of buying a home, but it's an essential aspect of the process. You’ll need to purchase homeowners insurance to protect your new property.

Shopping for insurance can be easy with

Jerry

on your team. Jerry can compare rates with over 50 top-notch insurance companies in under a minute. Plus, you can

bundle your home and auto insurance policies

for even more savings!

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FAQs

How much money do I need to buy a house in Louisiana?

How much money you need will depend on where you’re buying, how big of a downpayment you can make, and the kind of mortgage you qualify for. With average Louisiana home values around $177,990, starting with at least $13,000 in savings would be smart.

What credit score is needed to buy a house in Louisiana?

Preferably, you need a credit score of 620 to buy a home with a conventional mortgage in Louisiana. However, you may qualify for an FHA loan, VA loan, or local housing programs with a credit score of at least 500.

What is the best place by a house in Louisiana?

Housing prices throughout Louisianna are reasonably affordable compared to other states. More popular tourist destinations can find Higher-priced homes near Louisiana’s toe, such as New Orleans, Baton Rouge, and Thibodaux.

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