What to know about mortgage rates in Alaska

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Alaska is breathtakingly beautiful thanks to its abundance of rivers, lakes, oceans and ancient glaciers.

There’s no state income tax, and Alaska also offers a Permanent Fund Dividend, which will pay eligible residents to live there. These unique features make Alaska a great place to call home. 

If you’re searching for a home in Alaska, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands of dollars over the course of a 15-year or 30-year mortgage.

Mortgage debt in Alaska

Credit Karma members with mortgages in Alaska saw average mortgage debt of $241,435 in 2020 and an average monthly mortgage payment of $1,516.

That puts Alaska above the average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S. in 2020. 

Types of home loans

If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types that Alaska homeowners may consider. 

Conventional loans in Alaska

Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.

Alaska FHA loans

FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.

The FHA loan limit in 2021 is generally $356,352 for a one-unit property, but it can reach as high as $822,375 depending on where you live.

Some metro areas (and other areas) in Alaska have higher limits.

  • Anchorage
  • Juneau
  • Ketchikan

You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.

VA loans in Alaska

If you’re an eligible veteran or service member comparing mortgage rates in Alaska, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required and you may be able to qualify if you don’t have great credit. 

Similar to FHA loans, VA loans are insured by the government but issued by private lenders.

Conforming loan limits in Alaska

Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, government-sponsored enterprises that guarantee mortgages.

Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans. 

All of Alaska’s boroughs and census areas have a loan limit that’s higher than the most common limit of $548,250 for 2021.

First-time homebuyer programs in Alaska

If you’re hoping to buy your first home, there may be some assistance programs available to you in Alaska.

  • Alaska Housing First Home Program — The Alaska Housing First Home Program offers a lower interest rate to first-time homebuyers. You don’t have to meet any maximum income limits or purchase price limits. You should be ready to share copies of federal income tax returns for the previous three years. 
  • Alaska Housing Closing Cost Assistance — With Alaska Housing Closing Cost Assistance, you may be able to borrow up to 4% of your home loan amount. You can apply for this closing cost assistance for 30-year, fixed-rate government-backed loans (VA, FHA, USDA) as long as you have a minimum credit score of 640.
  • Alaska Housing Affordable Housing Enhanced Loan Program — The AHELP program provides down payment assistance through a number of organizations in Alaska. Options include grants, deferred payments and second mortgages.

Mortgage refinancing rates in Alaska

If you’re thinking about refinancing your mortgage, keep a few things in mind.

  • Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
  • Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But remember that you’ll owe the full amount plus interest, and the equity in your home will be less if you sell in the future. 
  • Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.