How to Buy a House in Nebraska: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration of various factors, including market trends and regional price variations. In Nebraska, the average home value is $265,273, which is significantly lower than the national average of $362,481. This difference can influence your financial planning and affordability considerations when buying a home in Nebraska.

Understanding down payment assistance programs, mortgage types and specific regulations and requirements can ensure a smooth journey toward homeownership in the Cornhusker State. MoneyGeek has compiled pointers to help you navigate the homebuying process in Nebraska, from saving the down payment and choosing the ideal location to finding the best financing option for your particular needs and credit history.

According to the U.S. Census Bureau, Nebraska's homeowner vacancy rate was 0.9% in the second quarter of 2024. The homeowner vacancy rate measures the percentage of vacant homes available for sale. It serves as an indicator of housing market conditions, helping to assess the balance between supply and demand.

A stable homeowner vacancy rate is generally around 2%, offering homebuyers choice and flexibility. Nebraska's rate of 0.9% suggests not enough inventory is available to meet buyer demand. Homebuyers in Nebraska may face competition and limited options, making it important to act quickly when suitable properties become available.

Before purchasing a house in Nebraska, review your financial and credit history. This step is essential because the stronger your financial profile, the better your chances are of getting approved when applying for a mortgage.

Your credit score plays a pivotal role in determining the mortgage loans and interest rates you qualify for. A higher score increases your chances of securing a reasonable rate. According to Experian, the average credit score in Nebraska is 731.

If you have bad credit, typically defined as a score below 580 on the FICO scale, getting approved for a mortgage may be challenging. Check the table below to see which mortgage type is ideal for you based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio (DTI) is a key metric that lenders use to determine how much of your monthly income goes toward debt payments. This helps them assess how much mortgage debt you can responsibly manage. According to Experian, the average mortgage debt in Nebraska was $170,529 in the third quarter of 2023. Taking on a mortgage adds a significant financial responsibility, making it essential to understand how your current debts impact your ability to take on new ones.

Monthly debt payments included in your DTI calculation encompass credit card bills, car loans, student loans and other recurring obligations. Use our debt-to-income ratio calculator below to determine your front-end DTI, which focuses on housing costs, and your back-end DTI, which includes all debt obligations. This tool will also help you see your total monthly debt payments.

Buying a house you can't afford can lead to financial stress and limit your ability to manage other expenses. To avoid this pitfall, consider the 28% rule, which suggests allocating no more than 28% of your monthly income to your mortgage payment. This guideline helps ensure that housing costs remain manageable, allowing you to maintain a balanced budget.

According to the U.S. Bureau of Labor Statistics, the median annual income in Nebraska in April 2024 was $46,440. This translates to a gross monthly income of $3,870 before taxes. When applying the 28% rule, you should aim to spend no more than $1,084 on your monthly mortgage payment.

Use our mortgage calculator below to get a ballpark figure of your monthly mortgage payment in Nebraska.

A down payment is the initial amount you pay when purchasing a house, often set at 20% of the home's value. This standard can pose a significant obstacle for many potential homebuyers. In Nebraska, the average home value is $265,273, which means a 20% down payment is $53,055. For homes priced above the average, such as $275,000, the 20% down payment is $55,000.

Fortunately, saving up for a 20% down payment is required. Most mortgage options allow for lower down payments. For example, VA loans require no down payment, while FHA loans require just 3.5%.

If you put down less than 20%, your lender may require you to take out private mortgage insurance. You can use our PMI calculator to estimate your monthly PMI premium based on your credit score and down payment.

Nebraska offers several down payment assistance programs that can make homeownership possible for many individuals. These programs provide financial support to cover initial costs, helping to bridge the gap for aspiring homeowners. Check out the table below for the available down payment assistance programs in Nebraska from the Nebraska Investment Finance Authority (NIFA).

Finding the right location in Nebraska involves considering several factors. You'll want to look at the average house price and ensure it fits within your budget. Proximity to family, friends, and work or school is also essential, as it affects your daily commute and social life. Access to public transportation, parks, restaurants and shopping centers can enhance your quality of life and should be part of your decision-making process.

The cost of living significantly impacts your choice of a new home. According to the Missouri Economic Research and Information Center (MERIC), Nebraska's cost of living index for the first quarter of 2024 was 93.4, which is below the national average of 100. This means living in Nebraska can be more affordable than in other states. Consider these essential expenses when choosing a location:

• Food
• Health care
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Check out the table below to see some cities in Nebraska and their average home values based on recent data. 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 Nebraska. They offer the advice you need, manage the paperwork and provide access to a broader list of property options you might not find on your own. They can also recommend other service providers, such as title companies and inspectors, to assist in your homebuying process.

When finding a real estate agent, do your due diligence and interview agents with experience in the neighborhoods you're interested in. Consider the following 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 Nebraska Real Estate Commission to find or verify real estate agents in Nebraska.

Navigating the homebuying process in Nebraska involves selecting the most suitable mortgage that aligns with your budget. Options include conventional, jumbo, FHA, VA and USDA loans. You can also choose from 10-year, 15-year, 20-year or 30-year terms and decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Selecting the best financing option boosts your chances of approval and helps save money over time.

Interest rates on a mortgage can change daily due to factors such as the type of mortgage, the lender and the overall economy. While the interest rate is the cost you pay each year to borrow money, expressed as a percentage, the annual percentage rate (APR) includes additional costs or fees. This makes the APR a more comprehensive measure of the true cost of borrowing, allowing you to compare different loan offers more accurately.

As of October 2024, the APR for a 30-year fixed conforming loan in Nebraska is 5.98%, while the APR for a 30-year fixed rate FHA loan is 8.00%. Check the table below to see the current mortgage rates in Nebraska by mortgage type.

Getting pre-approved for a mortgage in Nebraska is a strategic step in the homebuying process. It enables you to understand your borrowing capacity, making it easier to focus on homes within your budget. A pre-approval letter from a lender strengthens your offer in a competitive market and signals to sellers that you are a serious buyer. Typically valid for 60 to 90 days, this letter reflects a thorough evaluation of your financial status and provides a clear picture of your mortgage options.

For a mortgage pre-approval, you will need to submit several documents, including

• Proof of income (e.g., W-2 statements, pay stubs)
• Proof of assets (e.g., bank statements)
• Credit history
• Employment verification
• Identification (e.g., driver's license)
• Social Security number

Understanding the difference between mortgage pre-approval and prequalification is essential. Pre-approval involves a detailed assessment of your credit and financial status, resulting in a conditional commitment from the lender. In contrast, prequalification is a preliminary evaluation based on self-reported information, offering a general idea of what you might qualify for without any formal commitment.

Home inspections are highly recommended in the homebuying process in Nebraska as they provide a comprehensive evaluation of a property's condition. Inspectors typically examine key areas such as the foundation, roof, electrical systems, plumbing and HVAC systems. The inspection report includes detailed findings, potential issues and recommendations for repairs or maintenance. This information helps buyers make informed decisions and negotiate better terms.

For instance, an inspection might uncover major issues such as structural damage or outdated electrical systems. These findings can significantly affect the property's appraisal, potentially lowering its value. In some cases, the buyer might decide to rescind their offer based on the severity of the issues uncovered. This step ensures that buyers do not commit to a property with unforeseen problems, protecting their investment.

Home inspections in Nebraska are regulated by the Nebraska Secretary of State, ensuring a standardized approach to examining properties. Licensed home inspectors must follow specific guidelines covering the home's structural elements, exterior, roof, plumbing, electrical system, heating and air conditioning systems, interior, insulation and ventilation. These requirements help maintain consistency and reliability in home inspections in Nebraska.

If you're looking for a home inspector in Nebraska, ensure they are licensed. This guarantees they meet the state's standards. Consider finding out what previous clients have said by checking online reviews and asking for references. You can also use the Nebraska Secretary of State's directory of registered home inspectors to find or verify licensed inspectors.

Home appraisals provide an unbiased estimate of a property's market value. They ensure that the price agreed upon by the buyer and seller is fair and aligns with market conditions. According to the 2023 Appraisal Survey from the National Association of Realtors, the median appraisal cost in 2023 was $500.

While both inspections and appraisals are integral to the homebuying process, they serve different purposes. A home appraisal determines the property's market value, while a home inspection evaluates its physical condition. Lenders require appraisals to ensure the loan amount corresponds with the property's value. This requirement protects the lender's investment by confirming that the property's worth justifies the loan amount.

Closing is the final step in buying a house in Nebraska, marking the transfer of ownership and the moment you receive the keys. Your lender must provide a closing disclosure document three days before the official closing. This document outlines loan terms, monthly payments, fees and closing costs. Plan a final walk-through with your real estate agent near closing day to ensure the property is in the expected condition.

During closing day, you will review and complete various paperwork that finalizes your home purchase. Each document plays a role in ensuring the transaction is legally binding and protects your interests. Here are some of the key documents you will need to sign:

• Final loan application: This document confirms the terms of the mortgage you have agreed upon with your lender. It is crucial to review it carefully to ensure all information is accurate and reflects your understanding of the loan.
• Deed transfer: This legal document officially transfers ownership of the property from the seller to you, the buyer. Once signed, it will be recorded with the local government to establish your ownership rights.
• Promissory mortgage note: This note is a legal promise to repay the mortgage loan according to the agreed terms. It outlines the repayment schedule, interest rate and any penalties for late payments.
• Homeowners insurance: Obtaining homeowners insurance in Nebraska can protect your new home from potential risks and damages. It covers various perils such as fire, theft and weather-related events, providing financial security for your investment.

Closing costs are the fees and expenses incurred during the finalization of a real estate transaction. In Nebraska, the average closing costs are $3,748, according to NAR. These costs encompass various fees, including:

• Appraisal fee: The cost of having a professional appraiser assess the property's value.
• Title search and insurance fee: The expense for verifying the property's title and obtaining insurance to protect against future claims.
• Escrow deposit: Funds held in an escrow account to cover property taxes and insurance premiums.
• Prepaid costs: Advance payments for items such as homeowner's insurance and property taxes.
• Other closing costs: Additional fees that may include attorney fees, recording fees and more.

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

Buying a house in Nebraska is a significant financial commitment that lasts for years. We answered some frequently asked questions about buying a house in the Cornhusker State to kickstart your homebuyer journey.