How to Buy a House in Wisconsin: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration. The average home value in Wisconsin is $312,369, which is lower than the national average of $362,481. This difference may present opportunities for homeowners looking to invest in the state.

Understanding down payment assistance programs, mortgage types and state-specific regulations and requirements can ensure a smooth journey toward homeownership in the Badger State. MoneyGeek compiled pointers to help you navigate the homebuying process in Wisconsin, 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, the homeowner vacancy rate in Wisconsin for the second quarter of 2024 was 0.7%. The homeowner vacancy rate measures the percentage of vacant homes available for sale. It is a key indicator of the balance between housing supply and demand.

Wisconsin's homeowner vacancy rate suggests insufficient inventory on the market to satisfy homebuyer demand. When vacancy rates fall between 0.3% and 0.9%, it indicates a tight market with high demand and limited supply. Homebuyers in Wisconsin may face increased competition and potentially higher prices.

Before buying a house in Wisconsin, closely examine your financial and credit history. A strong financial profile can significantly improve your chances of getting approved when applying for a mortgage from lenders.

Your credit score influences the mortgage loans and interest rates you qualify for. A higher score increases your chances of securing a favorable rate. In Wisconsin, the average credit score in the third quarter of 2023 was 737, according to Experian.

If your credit score falls within the FICO scale's poor range of 300 to 579, buying a house is still possible, though getting approved for a mortgage may be challenging. Check the table below for your ideal mortgage type based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio (DTI) measures how much of your monthly income goes toward debt payments. Lenders use this to assess your ability to handle additional mortgage debt. According to Experian, the average mortgage debt in Wisconsin was $163,940 in the third quarter of 2023. This figure highlights the financial responsibility of taking on a mortgage.

Monthly debt payments included in your DTI calculation are your mortgage, credit card payments, student loans and other debts. Use our debt-to-income ratio calculator below to see your front-end DTI, back-end DTI, and total monthly debt payments. Front-end DTI includes housing-related costs, while back-end DTI encompasses monthly debt obligations.

Buying a house beyond your financial means can lead to financial strain. To avoid this, consider the 28% rule, which suggests that your monthly mortgage payment should not exceed 28% of your gross monthly income.

According to the U.S. Bureau of Labor Statistics, the median annual income in Wisconsin as of April 2024 was $47,590, or a gross monthly income of $3,966 before taxes. With the 28% rule, a reasonable monthly mortgage payment would be $1,110.

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

A down payment is an upfront payment when buying a house, typically set at 20% of the home's purchase price. This standard can be a hurdle for many homebuyers. In Wisconsin, the average home value is $312,369, which means a 20% down payment would be $62,474. For homes priced above average at $355,000, the down payment would be $71,000.

Fortunately, saving up for a 20% down payment is not a requirement. Many mortgage types allow for smaller down payments. For instance, VA loans require no down payment, and FHA loans require as little as 3.5%.

If you put down less than 20%, your lender may require you to take out private mortgage insurance. This insurance protects the lender if you default on the loan. Our PMI calculator can estimate your monthly premium based on your credit score and down payment.

Down payment assistance programs in Wisconsin under the Wisconsin Housing and Economic Development Authority (WHEDA) provide valuable support for those looking to purchase a home. Check out the table below to find the assistance that best suits your needs

Finding the right location for your home in Wisconsin involves considering factors, including the average house price in the areas you're interested in, proximity to family, friends, work or school and access to public transportation, parks, restaurants and shopping centers.

Remember that the cost of living also plays a role in your decision. According to the Missouri Economic Research and Information Center (MERIC), Wisconsin's cost of living index in the first quarter of 2024 was 97.0, below the national average of 100. Consider the following expenses when choosing your location:

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

Check the table below to see the average home values of some cities in Wisconsin 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 Wisconsin. Agents provide the advice you need, handle the paperwork, offer an expanded list of property options and recommend service providers like title companies and inspectors who are essential for buying a home in Wisconsin.

When finding a real estate agent, do your due diligence and interview agents experienced 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 Wisconsin Department of Safety and Professional Services to find or verify real estate agents in Wisconsin.

The homebuying process in Wisconsin involves finding a mortgage that fits your financial situation. Available options include conventional, jumbo, FHA, VA and USDA loans. You can select terms of 10, 15, 20 or 30 years and decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Choosing the best financing option can increase your chances of approval and help you save money over time.

Interest rates on a mortgage can fluctuate daily due to the type of mortgage, the lender and the broader economy. While the interest rate is the cost you pay each year to borrow the money, expressed as a percentage, the APR includes additional costs like fees and other charges, providing a more comprehensive picture of the cost of borrowing.

As of October 2024, the APR for a 30-year fixed conforming loan in Wisconsin is 5.98%, and for a 30-year fixed-rate FHA loan, it is 7.54%. Check the table below to see the current mortgage rates in Wisconsin by mortgage type.

Getting pre-approved for a mortgage in Wisconsin helps you understand your borrowing capacity and strengthens your offer when house hunting. Lenders typically provide a mortgage pre-approval letter, valid for 60 to 90 days. This letter signals to sellers that you are a serious buyer and financially capable of completing the purchase, potentially giving you an edge in competitive markets.

To get pre-approved, you need to submit several documents, including:

• Proof of income, such as pay stubs or tax returns
• Credit history and credit score
• Identification, like a driver's license or passport
• Bank statements
• Information about any debts or liabilities

While both mortgage pre-approval and prequalification provide insights into your financial standing, they differ in depth and accuracy. Pre-approval is a detailed review of your financial documents and credit history, offering a more accurate estimate of your borrowing power. Prequalification, on the other hand, is a preliminary assessment based on self-reported information.

Home inspections uncover potential issues that may not be visible to the untrained eye. Inspectors examine structural components, electrical systems, plumbing, roofing and HVAC systems. The inspection report includes detailed findings on the condition of these areas, highlighting any necessary repairs or safety concerns. This information helps buyers make informed decisions and potentially negotiate repairs or price adjustments with the seller.

For instance, an inspection might reveal major issues such as a faulty foundation or outdated electrical systems, which could impact the home's appraisal value and potentially lower it due to the cost of necessary repairs. In some cases, buyers may decide to rescind their offer if they are unwilling or unable to address problems.

Wisconsin regulates home inspections through the Department of Safety and Professional Services (DSPS). Inspectors in the state must follow specific standards of practice when conducting a thorough examination of a home's major systems and components.

If you're looking for a home inspector in Wisconsin, ensure they are licensed. Checking online reviews and asking for references can provide insight into an inspector's reputation. You can also use the DSPS' LicensE license lookup tool to verify an inspector's credentials.

Home appraisals objectively assess a property's 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 cost of a home appraisal was $500 in 2023.

While inspections and appraisals are integral to homebuying, they serve different purposes. A home inspection evaluates the property's condition, identifying potential issues requiring repair. Meanwhile, a home appraisal focuses on the property's value, ensuring it aligns with the agreed purchase price. Lenders require appraisals to confirm the home's value supports the loan amount.

Closing is the final step in buying a house in Wisconsin, marking the transfer of ownership and the moment you receive the keys to your new property. Your lender must provide a closing disclosure document three days before the official closing. This document outlines your loan terms, final closing costs and other transaction details. Near closing day, plan a final walk-through with your real estate agent to ensure the property remains in the expected condition.

On closing day, you'll find yourself reviewing and completing a variety of paperwork necessary to finalize your home purchase. Among the documents you'll sign are:

• Final loan application: This document confirms the terms and conditions of your mortgage loan. It ensures that all the details agreed upon with your lender are accurately captured.
• Deed transfer: This legal document transfers property ownership to you. It is crucial for establishing your legal rights as the new homeowner.
• Promissory mortgage note: This is a written promise to repay the mortgage loan. It outlines the repayment schedule and terms agreed with your lender.
• Homeowners insurance in Wisconsin: This protects your new home against risks and damages. Wisconsin offers coverage for various perils, ensuring financial security against unforeseen events.

Closing costs are the expenses over and above the property price that buyers and sellers incur to complete a real estate transaction. In Wisconsin, the average closing cost is $4,810, according to NAR, including various fees such as the following:

• Appraisal fee: This fee pays for the home's appraisal to determine its market value.
• Title search and insurance fee: This covers the cost of researching the property\'s title history and insuring against any title defects.
• Escrow deposit: This is an upfront deposit for property taxes and insurance held in an escrow account.
• Prepaid costs: These are upfront payments for items like homeowner\'s insurance and property taxes.
• Other closing costs: This category includes attorney, credit report and other fees.

Learning about the different first-time homebuyer programs in Wisconsin can help you achieve homeownership faster.

\We answered some frequently asked questions about buying a house in Wisconsin to kickstart your homebuyer journey.