Before You Buy a Home in Rhode Island: Financing, Location and the Contract

We help prepared buyers find and buy the right home at a fair market price. Buyers who prepare first shop with confidence, move quickly when the right home appears, and avoid surprises after they sign. Start with these three areas.

1. Financing comes first

Knowing how you'll pay, and what you can comfortably afford, is the first step. Without it you can't make an offer a seller will take seriously.

You can buy with cash, a mortgage, or a combination. If you're financing, these are the two main loan structures:

• Fixed-rate mortgage: your interest rate stays the same for the life of the loan, most often 15 or 30 years. A 15-year loan has higher monthly payments but costs far less in total interest.
• Adjustable-rate mortgage (ARM): the rate is fixed for an opening period, commonly 5, 7 or 10 years, then adjusts with the market. The starting rate is often lower, which can make sense if you expect to sell or refinance before it adjusts.

How much do you need to put down?

Twenty percent down is the traditional benchmark, but it isn't required. Putting 20% down on a conventional loan lets you avoid private mortgage insurance (PMI). Many buyers put down less:

• Conventional loans: as little as 3% to 5% down for qualified buyers
• FHA loans: 3.5% down, often a fit for buyers with smaller savings or lower credit scores
• VA loans: 0% down for eligible veterans, service members and some surviving spouses
• USDA loans: 0% down for moderate-income buyers in eligible rural and suburban areas

Rhode Island also has first-time homebuyer and down payment assistance programs worth asking your lender about.

2. Do your homework on location

A lower price doesn't always mean a better buy. Prices vary from town to town for real reasons, and those reasons affect what it costs to live there for years. Before you commit to an area, research:

• Property taxes, which vary widely between Rhode Island cities and towns
• Your commute to work and the places you go most
• Local amenities: shopping, parks, restaurants, healthcare
• Flood zones and insurance costs, especially near the coast
• Resale: how homes in the area have held their value

If a new area comes onto your radar mid-search, give it the same homework before you make an offer there.

3. Understand the contract before you sign it

The purchase and sale agreement does far more than name the property and price. Before signing, make sure you understand:

• Performance dates: when the deposit is due, when inspections must be done, when your mortgage commitment is due, and the closing date
• Contingencies: the inspection, financing and appraisal conditions that let you exit and recover your deposit if something goes wrong
• Deposits: how much, who holds it, and when you could lose it
• Special provisions: anything added to the standard form, such as repairs, credits or items included in the sale
• Condition at closing: what state the property must be in when you take ownership

If any term is unclear, ask before you sign. Once you're under contract, those dates and conditions are binding.

The best place to start is your numbers. The mortgage calculator shows what your monthly payment would be at different prices, including taxes and insurance.