How to Buy a House in Louisiana: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration. The average home value in Louisiana is $205,610, which is significantly lower than the national average of $362,481. This difference can impact your budget and financing options when buying a home in Louisiana.

Understanding down payment assistance programs, mortgage types, and state-specific regulations and requirements can ensure a smooth journey toward homeownership in the Pelican State. MoneyGeek compiled essential pointers to help you navigate the homebuying process in Texas, from saving for the down payment to finding the best financing option for your needs and credit history.

According to data from the U.S. Census Bureau, the homeowner vacancy rate in Louisiana in the second quarter of 2024 was 1.8%. The homeowner vacancy rate measures the percentage of vacant homes available for sale, which helps gauge the balance between housing supply and demand.

A stable vacancy rate — where homebuyers have some choice and flexibility in where they live — is around 2%. With Louisiana's rate at 1.8%, there is high housing demand for limited inventory. This situation can make it challenging for homebuyers to find available properties, potentially leading to higher competition and prices.

Before buying a house in Louisiana, examine your financial and credit history closely. A strong financial profile increases your chances of getting approved when applying for a mortgage.

Your credit score plays a significant role in determining the mortgage loans and interest rates you qualify for — the higher your score, the more likely you are to get a desirable rate. According to Experian, the average credit score in Louisiana is 690.

If you have bad credit (between 300 to 579 on the FICO scale), getting approved for a mortgage may be more difficult. Check the table below for your best mortgage type based on the minimum credit score requirements.

Source: Experian

Your debt-to-income (DTI) ratio helps lenders see how much of your monthly income goes to paying off debts. This allows them to evaluate the amount of mortgage debt you can take on. In Louisiana, the average mortgage debt is $175,694, according to Experian. This figure highlights the additional financial responsibility you may consider when taking on a mortgage.

Monthly debt payments included in your debt-to-income ratio consist of obligations such as mortgage, credit card payments, and other loans. Use our DTI ratio calculator below to see your front-end DTI, which focuses on housing-related debts, and your back-end DTI, which includes all monthly debts.

Buying a house is a significant financial commitment, and it's easy to make the mistake of purchasing more than you can afford. To avoid this, use the 28% rule as a guideline. This rule advises that you should not spend more than 28% of your monthly income on your mortgage payment. By adhering to this guideline, you can safeguard your financial health and prevent future stress.

According to the U.S. Bureau of Labor Statistics, the median annual income in Louisiana in April 2024 was $41,320. This translates to a gross monthly income of $3,443 before taxes. Applying the 28% rule, you should aim to spend no more than $964 on your monthly mortgage payment.

Use our mortgage calculator below for a more precise estimate tailored to your situation.

A down payment is a portion of the total cost paid upfront when purchasing a home, often set at 20% of the property's price. This amount can be a significant barrier for many homebuyers. In Louisiana, the average home value is $205,610, making a 20% down payment approximately $41,122. For homes priced above the average at $215,000, the down payment rises to $43,000.

Fortunately, saving up for a 20% down payment is not a requirement. Many mortgage types allow for lower down payments, easing the financial burden. Government-backed loans like VA loans require no down payment, while FHA loans require only a 3.5% down payment.

Keep in mind that putting down less than 20% may necessitate taking out private mortgage insurance. You can use our PMI calculator to estimate your monthly private mortgage insurance premium based on your credit score and down payment.

Louisiana offers several down payment assistance programs designed to make homeownership more accessible to a wider audience. These programs can significantly reduce the initial financial burden, making it feasible for many who might otherwise find it challenging to gather the required down payment. Check out the table below for the available down payment assistance programs in Texas offered by the Louisiana Housing Corporation.

Finding the right location in Louisiana for your new home involves considering several factors, including the average house price, proximity to family, friends, and work or school, and access to public transportation, parks, restaurants and shopping centers. These elements can significantly impact your quality of life and daily convenience.

The cost of living also affects your decision in choosing your new home. According to the Missouri Economic Research and Information Center (MERIC), Louisiana's cost of living index in the first quarter of 2024 is 92, which is lower than the national average of 100. When selecting the right location, consider these essential expenses:

• Food
• Healthcare
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

CUse the table below to see some cities in Texas and their average home values. You can also use our cost of living calculator to help you estimate how much you'll need to pay for all the essentials in different locations.

Source: Zillow

Working with a real estate agent can significantly speed up your house hunt in Louisiana. They offer the advice you need, manage the paperwork, and provide an expanded list of property options that you may not have access to on your own. Additionally, agents can recommend other service providers like title companies and inspectors, which are essential in the home-buying process.

When finding a real estate agent, ensure you do your due diligence and interview those with experience in the neighborhoods you're interested in. Consider these tips:

• Find someone compatible with your needs and personality
• Verify the agent's credentials, training, and licensure
• Ensure they have in-depth knowledge of the area
• Shop around for agents and compare their rates

You can also use the license holder search tool from the Louisiana Real Estate Commission to find or verify real estate agents in Louisiana.

The homebuying process involves securing a mortgage that aligns with your financial capacity. In Louisiana, you can explore various options such as conventional, jumbo, FHA, VA and USDA loans. You also have the flexibility to select from 10-year, 15-year, 20-year or 30-year terms. Consider whether a fixed-rate mortgage or an adjustable-rate mortgage (ARM) suits your needs. Opting for the right financing option not only enhances your approval chances but also helps you save money over time.

Interest rates on a mortgage can change daily due to factors like the type of mortgage, the lender and the economy. The annual percentage rate (APR) differs from the interest rate as it includes additional costs like fees, providing a clearer picture of the actual cost of borrowing.

As of September 2024, the APR for a 30-year fixed conforming loan in Louisiana is 5.74%, while the APR for a 30-year fixed rate FHA loan is 7.97%. Check the table below to see the current mortgage rates in Texas by mortgage type.

Getting pre-approved for a mortgage in Louisiana helps you understand your budget and demonstrates to sellers that you are a serious buyer. Lenders usually issue a mortgage pre-approval letter, which states the loan amount you are qualified for based on a thorough review of your financial situation. This letter is typically valid for 60 to 90 days, giving you a specific timeframe to find a home and finalize your loan.

To get pre-approved for a mortgage, you must submit several documents. These include:

• Proof of income
• Proof of assets
• Credit report
• Identification
• Employment verification

It's important to understand the differences between mortgage pre-approval and prequalification. Pre-approval involves a detailed review of your financial health, including a credit check and verification of your income and assets. Prequalification is a preliminary assessment based on self-reported information and does not involve a credit check or in-depth financial review.

Home inspections are a highly recommended step in the homebuying process in Louisiana. Inspectors typically examine critical areas of the home, including the roof, foundation, electrical systems, plumbing and HVAC systems. The inspection report usually includes findings on these components, highlighting any existing issues or potential concerns. This helps buyers understand the property's actual condition and anticipate necessary repairs or maintenance.

For instance, if an inspection reveals major problems such as a compromised foundation or outdated electrical systems, these issues can impact the home's appraisal. The appraisal may reflect a lower value due to the cost of necessary repairs. This situation could lead the buyer to reconsider their offer, possibly deciding to rescind it based on the inspection's findings.

In Louisiana, home inspections are regulated by the Louisiana State Board of Home Inspectors (LSBHI). Licensed home inspectors are required to adhere to specific standards of practice, focusing on inspecting readily accessible installed systems and components of the home. They must also provide a written report to the client within five days of the inspection, ensuring transparency and accountability in their assessments.

If you're looking for a home inspector in Louisiana, ensure they are licensed. Check what other clients have said by reviewing online feedback and asking for references to ensure you hire a reliable professional. You can also use the LSBHI's license search tool to find licensed home inspectors in Louisiana.

Home appraisals are a necessary step in the homebuying process in Louisiana. They provide an objective assessment of a property's fair market value, which is essential for both buyers and lenders. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost in 2023 is $500.

A home appraisal differs from a home inspection in several ways. A home appraisal determines the property's value, whereas a home inspection evaluates its physical condition. Lenders require appraisals to ensure that the loan amount does not exceed the property's value, safeguarding their investment.

Closing is the final step of buying a house in Louisiana, where the final transfer of ownership occurs and you receive the keys to the property. Your lender must provide a closing disclosure document three days before the official closing. This document includes loan terms, projected monthly payments, fees and other closing costs. Plan a final walk-through of the property with your real estate agent near closing day to ensure it's still in the expected condition.

During closing day, you'll review and complete a lot of paperwork. Some of the key documents you need to sign include:

• Final loan application: Confirms all the details of your loan, including the interest rate and loan amount. It verifies your financial information and ensures everything is accurate before finalizing the loan.
• Deed transfer: Transfers property ownership from the seller to you. It is a legal requirement to officially become the home's new owner.
• Promissory mortgage note: Outlines your loan repayment terms, including the amount you owe, the interest rate and the repayment schedule. It is a legal promise to repay the loan under the specified terms.
• Homeowners insurance: Protecting your new home is essential. Louisiana home insurance covers potential damages to your home and provides peace of mind as you settle into your new property.

Closing costs are the fees and expenses you pay to finalize a real estate transaction. In Louisiana, the average closing costs amount to $3,346, according to NAR. Some of the fees included are:

• Appraisal fee: The cost of having a professional appraiser determine the value of the property.
• Title search and insurance fee: Fees for verifying the property's title and securing insurance to protect against future title disputes.
• Escrow deposit: Funds held in a mortgage escrow account to cover future property taxes and insurance premiums.
• Prepaid costs: Advance payments for property taxes, homeowners insurance and mortgage interest.
• Other closing costs: Additional fees such as loan origination, recording and credit report fees.

If you are a first-time homebuyer, learning about the different first-time homebuyer programs in Louisiana can help you achieve homeownership faster.

Buying a house is a significant financial commitment that will last for years. To help you kickstart your homebuyer journey, we answered some frequently asked questions about buying a home in Louisiana.