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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Rhode Island, the average 30-year fixed mortgage rate is 5.59% — up from 2021's historic lows. This raises the average monthly mortgage payment to $2,007 (assuming a 20% down payment at the median home value).
But buying a home in Rhode Island is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Rhode Island with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $87,485 for the typical home in Rhode Island — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Rhode Island want you to contribute 20% of the purchase price as a down payment. That would be $87,485 for a $437,424 home — the typical home value in Rhode Island.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.59% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Rhode Island down payment assistance programs
The state of Rhode Island offers several down payment assistance (DPA) programs for first-time and low-income homebuyers. If you are eligible, you could receive financial aid to pay for closing costs or a down payment.
Here are a few options for Rhode Island residents that you may qualify for:
RIHousing 10kDPA Program
RIHousing's 10kDPA Program provides a loan of $10,000 to first-time homebuyers who also have a RIHousing first mortgage. The loan requires no monthly payments and accrues no interest. Payment is only required when the property is sold, is no longer the buyer's primary residence, or the title is transferred.
All borrowers must have a minimum credit score of 660 and complete a homebuyer education course. Household income and home price limits apply and vary by county.
RIHousing Extra Assistance Program
RIHousing's Extra Assistance Program offers a second mortgage of up to $15,000 to first-time homebuyers with a RIHousing first mortgage. The interest rate of this mortgage will be the same as the first mortgage.
To qualify for this program, buyers must have a minimum credit score of 620 and complete a homebuyer education course. Household income and home purchase price limits apply and vary by county.
U.S. Department of Housing and Urban Development
HUD’s list of alternative programs in Rhode Island can be found here.
Step 2: Find a great real estate agent in Rhode Island
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Rhode Island.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Rhode Island will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Rhode Island home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Rhode Island is $437,424, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Providence:
Home value appreciation in Providence
Step 5: Start house hunting in Rhode Island
🔑 Key takeaway:
Rhode Island’s real estate market is strong — listing prices have been climbing up in the past year while inventory continues to dip. It may be extra challenging to hunt for a house in the state, so review your priorities and temper your expectations. Your realtor will be of great help here. While the listings they show may not immediately check all your boxes, they may just surprise you with a great deal that’ll be worth the trouble.
Searching for homes in Rhode Island is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Rhode Island can have a big impact on your number of options. For example, in Rhode Island, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Rhode Island. Historically, there are 53.2% fewer homes for sale than during Rhode Island's peak season.
Housing inventory in Rhode Island by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
🔑 Key takeaway:
The market in Rhode Island is very active — homes are flying off the market and few listings are left open at the end of each month. If you find a home that you like, then you’ll need to put in an offer fast, probably right after you view it. For the best results, work out your options for contingencies and concessions with your agent as soon as possible. That way, you can immediately put in a strong, competitive offer to catch the seller’s attention from the onset.
Once you find a Rhode Island house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Rhode Island, homes stay on the market for 55 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Rhode Island homes sell fastest in June, where the average property is only on the market for 43 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 20 days longer than Rhode Island's annual average.
Average time homes spend on market in Rhode Island
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Rhode Island
Having your Rhode Island home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Rhode Island-specific inspections
Rhode Island has strict disclosure laws for sellers, but it's still wise for buyers to conduct thorough testing before closing on a home. In addition to a general home inspection, buyers are strongly encouraged to have the following tests completed as well:
- Radon testing: Some areas of Rhode Island can have elevated levels of radon, which can pose health risks to anyone living in the region. If the seller hasn’t had a radon test performed in the past year, consider ordering an inexpensive radon test kit from the American Lung Association.
- Pest inspection: Although pest inspections aren't always required by lenders, it's still a good idea to have a professional check a home for unwanted critters. Termites and other pests can cause structural damage and pose health hazards to your family, so it's essential to find infestations before they do serious harm.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
On closing day, you'll have two final steps before becoming a Rhode Island homeowner. First, you'll meet at the title company to finish some paperwork. Next, you'll settle your closing costs.
Plan to spend about an hour reviewing and signing documents for the title transfer and loan. This paperwork is essential for a seamless title transfer, so be sure to check that all of the information is correct before signing anything.
A few important documents will include:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
After you finish the paperwork, you'll settle your closing costs. The title company will collect the total amount you owe and distribute the funds to the correct recipients for you.
If you're wondering what your closing costs actually entail, you can usually break them down into four categories:
- Lender fees: Fees your lender charges for originating and underwriting your loan. Your lender fees might also cover other costs associated with your mortgage, such as appraisal fees or survey fees.
- Title and escrow charges: Fees the title company charges for conducting the closing process. Buyers and sellers often split this cost.
- Prepaid costs: Ongoing costs of owning a home. Some mortgage lenders require their borrowers to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous expenses that are unique to each buyer. Some other closing costs can include natural disaster certification fees or real estate attorney fees.
Buyers in Rhode Island typically pay 3–5% of the purchase price in closing costs. For a $437,400 home — the typical home value in Rhode Island — that's between $13,122 and $21,870!
Frequently asked questions
In Rhode Island it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Rhode Island neighborhoods
- Partner with the right real estate agent in Rhode Island
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes! RIHousing’s First-Time Homebuyer Loan offers 100% financing options for people working with participating lenders. The program can also be used in conjunction with the Extra Assistance loan, which can offer up to $15,000 for down payment costs.
There are household income and home purchase price limits for these programs. Eligible households with 1 to 2 people must not earn more than $99,730 annually. Households with 3 or more individuals cannot earn more than $114,689 per year.
The maximum home purchase price for the entire state is limited to $492,201. If accepted into the program, participants must take a homebuyer education course.
Why trust us?
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Our team of industry-leading researchers are committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.