The Badger State currently has a hot real estate market. With gorgeous sights, friendly communities, and serious state pride,
Wisconsin is a great place to buy a home.
Buying a house is no small task. There’s a ton to consider before you can even go house hunting! Luckily, insurance broker
Jerry created this guide to help you figure out how to buy a home in Wisconsin. We’ll teach you how to figure out your finances, get preapproved for a mortgage, buy home insurance, and find the best house for your needs.
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Figure out your finances
The first step of buying a house doesn't involve Zillow, banks, or real estate agents. It’s taking the time to slow down, grab a calculator, and figure out your finances.
Buying a home is one of the largest financial purchases you’ll ever make. The majority of home buyers pay off a house over decades, so there’s a lot to consider when deciding what type of house you can afford. To know what you can afford, you need to have a grasp on your credit score, debt-to-income (DTI) ratio, and the fees and costs associated with buying a house.
Check your credit score
The first thing to figure out is your credit score. This number indicates your financial trustworthiness to lenders—it shows them how likely you are to pay back a loan. If your credit score is too low, banks might not be willing to give you a mortgage.
For Wisconsin buyers, you want a credit score at or above 620 to get approved for a loan. If your credit score is below 620, it may be a struggle to get your much-needed mortgage.
Here are a few solutions if you have a low credit score:
If you can wait to purchase your home, you can take the time to raise your credit score. You can do this by paying off your debts and trying to raise your credit score.
If you can’t wait, the Federal Housing Administration (FHA) or the Veterans Administration (VA) offer mortgages to buyers with low credit scores. Be aware, only active service members or veterans can get a mortgage from the VA.
Calculate your debt-to-income (DTI) ratio
You also need to be aware of your debt-to-income ratio (DTI) to know what you can afford.
Simply put, your DTI is how much you owe over how much you make.
To calculate your DTI, you need to divide your monthly payments by your pre-tax income. If your expenses are above 50% of your total income, it’ll be hard to get approved for a mortgage. The goal for financial health is to have a DTI below 36%.
The payments to factor into your DTI include:
Determine your down payment
With the above numbers settled, you can get an idea of if you can afford a house. The next step is deciding how much of your house you want to pay in a lump sum.
Most mortgages require a down payment, which is a percentage of the total purchase price you pay when you sign a mortgage. For most mortgages, the down payment is about 20%.
That means you don’t just need good finances that show you can pay off a monthly debt—you also need enough savings to pay off a substantial chunk of your home.
There are advantages to a large down payment (assuming you can afford it)—the more you pay at once, the less you need to borrow. This will save you money on interest in the long run and lead to lower monthly payments.
If 20% of the purchase price is too much for your savings account, there are solutions. The Federal Housing Administration (FHA) and the Veterans Administration (VA) both offer mortgages with low down payments. The FHA can offer a down payment as low as 3.5%, while the VA can offer mortgages with no down payment.
The Wisconsin Housing and Economic Development Authority also offers the Capital Access Advantage program, which offers an interest-free loan of up to $3,500. With this, you can pay off the down payment monthly alongside your normal mortgage or defer payment until your mortgage is paid off.
Prepare for closing costs and other fees
There’s one final number to consider—closing costs! This is how much you’ll end up paying in one-time fees and expenses when buying a home.
In Wisconsin, homeowners can expect to spend between 2-5% of the house’s total price on closing costs. Since (according to
Zillow) the average value of a house is $246,162 in Wisconsin, that means the average home could see closing costs as high as $12,000.
The following fees can be a factor in your closing costs:
Home appraisal (required by most lenders) fee
Earnest money (i.e., a deposit that will go towards your down payment)
Unfortunately, Wisconsin has some of the highest property taxes in the country, with an average property tax rate of 1.68%. Check the average property tax in the area you plan to move to in order to get a better sense of your expenses.
Key Takeaway Your closing costs can cost 2-5% of the house’s total price.
Look for homeowners insurance
One last expense you need to be aware of: homeowners insurance. Paid either yearly or once a month, homeowners insurance protects your home, property, and possessions, while also offering liability insurance and loss of use coverage.
Homeowners insurance can save you from massive financial losses. It is also frequently required to get a mortgage.
In the U.S, the average homeowners policy costs $1,387 per year or $115 per month. Wisconsin's prices are close to the national average, with the average homeowner paying $1,200 a year.
The best way to get a good deal on your homeowners policy is to go comparison shopping. This is the act of looking at multiple quotes side-by-side to see which company is offering you the best price. You don’t need to do this alone, however—just download the
Jerry is a licensed brokerage app that will gather quotes for you, giving you access to a long list of quotes from top providers. Just pick the quote that fits your needs and Jerry helps you sign-up.
Key Takeaway Use insurance broker Jerry to simplify your home insurance shopping.
Get preapproved for a mortgage
Now that you know you can afford it, you should go get preapproved for a mortgage. This will help you when you start going house shopping as some owners require it for entry to house tours.
To get preapproved, fill out a mortgage application and give the following information to your prospective lender:
The lender will use this information and a credit check to determine whether they can give you a mortgage.
Be warned: lenders will do what is known as a hard credit check, which could potentially lower your credit score. So make sure you’re ready for the approval process before you apply!
How to pick the right mortgage in Wisconsin
There are two decisions to make when choosing your mortgage: the mortgage term and the interest rate.
The mortgage term is how long you’ll be paying off your mortgage. This is usually somewhere between 15 and 30 years.
Your mortgage term (plus credit score and lender) will determine your interest rate. This is a set amount extra you’ll pay the lender. Long mortgages have higher interest rates (usually around 3.5%), while shorter mortgages have lower interest rates (2.5%).
Just like you’d shop around for insurance, you can shop around for a mortgage. Some lenders may offer you a lower interest rate than others.
Look for a house
You’ve been preapproved. Now comes the fun part—you get to go find your new home!
Pick your city or neighborhood
You should first settle on a town or neighborhood. Choose somewhere you can afford the type of house you want while meeting your lifestyle criteria. Are you desperate for great nightlife? Good public schools? Abundant nature? These factors can all help you decide the right neighborhood for you.
Whether you settle into a city like Madison or Milwaukee, a suburb like Whitefish or Shorewood, or one of the many smaller towns, make sure you’ve chosen the right location—you’re likely to live there for a long time!
Buyer’s market vs. seller’s market
Another consideration is if you’re moving into a buyer’s market or a seller’s market.
A buyer’s market is when there are more homes than buyers, meaning houses sit on the market for a while. During a buyer’s market, you’re more likely to get a good deal on a home.
A seller’s market is when there are more buyers than homes, giving the sellers an advantage. This means you need to act decisively to get a home and may end up paying above the asking price.
Wisconsin’s real estate market is currently hot, with home prices rising and less availability. That means you’re more likely to deal with a seller’s market in Wisconsin.
Find a real estate agent
If you’re overwhelmed by the home buying process, you should consider hiring a professional. A real estate agent can do a lot of the legwork and make it easier for you to find the home of your dreams.
Make an offer
Once you’ve found the right home, it’s time to make an offer. Depending on the market, you’ll either offer below, at, or above the asking price. A real estate agent can help decide on an offer and assist with all the necessary paperwork.
If the offer is accepted, congrats! You’re now a homeowner!
How to save on homeowners insurance
With all the new expenses associated with being a homeowner, you should try and lower your costs however you can. One easy way to save is to go comparison shopping with insurance broker Jerry.
After you download the Jerry app, you’ll go through a quick, free sign-up process to gain access to a long list of competitive quotes. You can use these quotes to get an inexpensive policy. Plus, Jerry sends you new quotes every year at renewal, so you know you’re always getting the best possible deal.
Jerry was wonderful! I used it for my auto and renters policies. I trusted it so much that I signed up my homeowners insurance under Jerry as well. All of the agents are amazingly nice and knowledgeable.” —Mary Y.