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What Does it Take to Finance a Home in Columbia?

Kid playing on phone while dad looks at finances

Homes in Columbia have undergone massive price appreciation. The median price of a single-family home in the city limits of Columbia increased by 50 percent from 2017 to 2022, up to $300,000. Some financial news outlets are now predicting Columbia will see the highest home appreciation in the country over the next 10 years, pushing the median price of homes in Columbia well above the national average. Currently, Columbia’s median home price is $20,000 below the national median home price.  

From experiencing so much price appreciation in Columbia, what does it take to buy and finance a home in our area?  

First, you will need a credit score of a minimum of 580 to qualify for most types of mortgages, but the closer your credit score is to 580, the higher the down payment may be and the interest rate a buyer will pay. Most loans require a minimum credit score of 600. You also need a debt-to-income ratio, including your new mortgage payment, of typically 43 percent or less.  

A buyer’s down payment will vary based on the type of loan they qualify for, and it has become the biggest hurdle for new homebuyers as homes keep getting more expensive. The median-priced single-family home in 2023 in Columbia has been as high as $330,000. To qualify for a conventional loan, a buyer must put down 20 percent of the purchase price — around $66,000 — and closing costs.  

First-time homebuyers or anyone who hasn’t owned a home for three years are eligible to qualify for Federal Housing Administration (FHA) loans. First-time buyers can pay as little as 3.5 percent for a down payment. A typical first-time buyer will have a purchase price of less than the median price, but if they did purchase a median-price home, their down payment would be around $11,500. In addition, they’ll have a higher monthly payment of their loan balance and additional fees associated with FHA loans.  

Other mortgages allow buyers to finance 100 percent of their mortgage, such as Veterans Administration (VA) loans and Department of Agriculture (USDA) loans. VA loans are only available to U.S. military veterans, while USDA loans are only eligible for properties outside municipalities. In addition, some buyers can qualify for down payment assistance to help bridge the gap to help them qualify for a mortgage they could not own on their own. 

Through the housing programs division, the city of Columbia also has additional affordable housing assistance programs offering forgivable loans for down payment assistance for low- to medium-income buyers.  

Homeownership costs in Columbia continue to increase because of price appreciation. The rate of home value appreciation in Columbia is estimated to triple compared to the national average percentage. Unfortunately, that will make home affordability difficult for first-time homebuyers who need a stronger financial position than in the past. This is on top of mortgage rates now up to 8 percent or more, a 25 percent increase for 2023, and a 130 percent increase since the beginning of 2022, taking interest paid on a median-price home from $168,000 to over $430,000 for a 30-year fixed-rate mortgage.

Brian Toohey

Brian Toohey is the chief executive officer for the Columbia Board of REALTORS®

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