Overview of Connecticut Housing Market
Connecticut is one of the least-affordable states to own a home. Connecticut homeowners face a heavy tax burden with both high property tax rates as well as progressive state income taxes.
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Factors in Your Connecticut Mortgage Payment
One of the first costs to factor in after your monthly mortgage payment is property taxes. You might even have an escrow account with funds just for this purpose. Curious where that money goes? In Connecticut, cities and towns set rates and collect property taxes for the majority of local government services and public services, such as schools and infrastructure maintenance. It’s not cheap either: Connecticut has the eighth-highest property tax rates in the nation, which an effective rate of 1.83% of home value.
To determine your property tax rate, assessors assigned by the local municipality assign your home its fair market value at least once every five years. After that, Connecticut’s assessment ration of 70% is applied, which means that a property’s assessed value is equal to 70% of the home’s market value. You pay taxes on the lower, assessed value.
Members of special populations, such as the elderly, disabled or veterans, can apply for tax credits or exemptions, depending on what their city or town offers.
Another cost, which is also commonly rolled into your escrow account, is homeowners insurance. Connecticut has the fifth-highest average premium at $1,651 per year, according to our Most Affordable Places to Live study. The state is relatively vulnerable to hurricanes, with an estimated value of insured coastal residential properties vulnerable to hurricanes at $296 billion, according to the Insurance Information Institute. In 2012, Hurricane Sandy resulted in $500 million in private insurance claims in Connecticut. And in 2015, there were over 40,600 flood insurance policies in Connecticut. Flood insurance, not included in most homeowners policies, is a must for those in coastal areas, and is provided by the National Flood Insurance Program.
Those who can’t find insurance on the voluntary market should apply for basic homeowners coverage under the Connecticut FAIR plan. This is a last resort market and is a basic policy for those unable to obtain insurance elsewhere.
Costs to Expect When Buying a Home in Connecticut
Before you even get to an escrow account, there are some one-time costs during the home buying process you should consider. One of the first is a home inspection. While Connecticut sellers are required to provide a property disclosure, it’s not considered a substitute for an inspection. In Connecticut, a home inspection costs anywhere from $250 to about $450. The final bill will depend on the size and type of home, as well as if you opt for additional testing such as termites, mold or radon.
One of the last stages of buying a home is when you finalize the contract and set a date for closing. This is when you sign all the remaining paperwork and usually get keys to the home. Unfortunately, it comes with a slew of fees to pay called closing costs. You’ll pay your mortgage lender, county and/or state as well as other involved parties. In Connecticut, closing costs typically range from 2% to 4% of the home price.
Average Closing Costs by County
|County||Avg. Closing Costs||Median Home Value||Closing Costs as % of Home Value|
SmartAsset’s Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.
Closing costs breaks down into individual fees and items to pay. Your lender takes a percentage of your closing costs, called origination fees. This includes underwriting, tax service, broker charge points, document preparation and commitment fees. Origination fees aren’t set in stone. Each lender charges varying amounts for each service, so it’s something you can shop around for when you first look at mortgage estimates.
Another percentage of closing costs are third-party fees, such as attorneys, appraisals, credit reports, surveys and flood certification. This can also vary depending on who provides each service and whether you opted for the service at all. For example, not all homebuyers hire an attorney for the purchase contract, many choose to use only a realtor.
Title insurance is another cost that comes into play. This type of insurance helps protect against financial loss with future title disputes such as undisclosed liens, easements and more. Your lender requires a policy that covers the lender’s interest in the property. However, homebuyers have the option to purchase an owner’s policy to cover the full value of the property as well as themselves.
Finally, Connecticut charges a conveyance tax for property title transfers. Most commonly, the seller pays this charge. The state conveyance tax is 0.75% of the assessed value up to $800,000. If the house is worth above that, the tax rate is 1.25%. On top of the state tax is a municipal conveyance tax of 0.25% for most towns. Some areas are permitted to maintain higher rates, such as Stamford with a municipal tax rate of 0.35% and Norwalk with 0.50%.
Details of Connecticut Housing Market
Connecticut, also known as the Constitution State, is one of the six official states within the area designated as New England. Bordered by the Long Island Sound and Atlantic Ocean to the south, Rhode Island to the east, Massachusetts to the north and New York to the west, this rectangular-shaped state has roughly 4,840 square miles in land area.
With a population of about 3.6 million residents, the state is the 29th-largest by population in the nation. The highest populated cities are Bridgeport, New Haven, Hartford, Stamford and Waterbury. Three of the top five, Bridgeport, New Haven and Stamford, are located along the coastline.
In our Healthiest Housing Markets study, Connecticut was near the bottom, coming in at 37th, mainly due to its lack of affordable housing stock and percentage of homes sold for a loss. However, it did rank high for stability. According to report compiled by Berkshire Hathaway using data from the National Association of Realtors, Connecticut’s average price for a single family home was $390,800 in 2017’s second quarter. From 2016 to 2017, overall prices for condos and homes increased 3.1%. Sales volume increased 5.7% year-over-year and days on market decreased by 9.1%, indicating strong demand. The issue of affordability and homes close to city centers is increasing each year in Connecticut as first-time homebuyers and downsizers are competing for the same inventory.
If you’re planning to buy in one of the bigger cities, prepare to shell out a significant amount of money. Stamford’s median sales price was $600,000 in second quarter 2017. At only 30 miles from New York, Stamford is considered part of the great New York metropolitan area. Further up the coastline, you’ll find better prices. Bridgeport’s median sales price was $177,000. Even further up the coast to the home of Yale University, New Haven’s median sales price was only a little higher at $227,000. If you go north to the capital, Hartford’s median sales price was only $128,000.
Local Economic Factors in Connecticut
Connecticut’s known as the Insurance Capital of the World, a title bestowed on the state for more than two centuries. Home to the highest number of actuaries and insurance employees per capita, the statement holds true. Insurance and financial services account for almost one-fifth of Connecticut’s Gross State Product. Other than banking, Connecticut’s known for ESPN, NBC Sports Group and World Wrestling Entertainment, Inc. Eighteen Fortune 500 companies are headquartered in the state, including Aetna, United Technologies, Xerox and Priceline Group. Connecticut is also notable for being home to Yale University, Wesleyan, Quinnipiac and the University of Connecticut.
In 2016, Connecticut had the highest per capita personal income (PCPI) in the U.S. at $71,033, according to the Bureau of Economic Analysis. The national PCPI was $49,571. Connecticut's was 143% of that number, and an increase in PCPI of 3.2% from 2015. However, Connecticut’s projected unemployment rate in July 2017 was 5.0% compared to the national rate of 4.3%, according to the Bureau of Labor Statistics.
With the high PCPI Connecticut offers, comes the downside: taxes. Connecticut has a heavy tax burden, one of the top 10-highest in the nation. Your income is taxed at progressive rates tied to your income. Say, for example, your federal adjusted gross income (found on line 37 of IRS form 1040 ) is $65,000 a year. Single filers wouldn’t subtract anything with the Connecticut personal exemption, but married and filing jointly couples would subtract $7,000. The tax rate would be 5.50%, which is the rate for taxable income between $50,000 and $100,000. There are tax credits for certain circumstances, so it’s worth doing your homework before filing your taxes.
Connecticut has a single, statewide sales tax of 6.35% which no local sales tax. The state also levies an estate tax on inheritances above $2 million.
The best way to get an idea of what living in Connecticut will do to your wallet, is by using a cost of living calculator. With this tool, you can compare your current hometown’s costs to where you’re hoping to move. Let’s take a look at a few examples. To start, a single person making $65,000 would pay an average of 5% lower in a move from Boston, Massachusetts to Stamford, Connecticut. The difference is mainly due to lower housing and food costs in Connecticut. If you look at San Francisco, California compared to New Haven, Connecticut’s 14% cheaper on average to live on the East Coast, with lower housing and food costs making the difference. However, if you swap San Francisco with Chicago, Illinois, New Haven has a 3% higher housing cost on average mainly due to all three factors: tax, housing and food costs.
Mortgage Legal Issues in Connecticut
Connecticut is considered a relatively buyer-friendly state. Sellers in Connecticut are required to provide a disclosure prior to the purchaser’s execution of any contract. Connecticut’s Uniform Property Condition Disclosure Act puts that requirement into law, which is not something you’ll find in every state. Further, in Connecticut, if the seller doesn’t provide the mandated disclosure, she has to credit the buyer with $300 at closing. A Connecticut seller’s disclosure covers general information such as age of the home, whether the property is in a flood hazard area, home issues such as rot or termites and more. While the paperwork gives the buyer an idea of the condition of the home prior to purchase, it’s not a warranty or a substitution for inspections and tests, which is also stated on the form as a warning.
Taking a look at Connecticut’s foreclosure process, you’ll find that the state follows a judicial process. This means the court is involved, and generally takes longer than a non-judicial foreclosure where the timeline from default to losing your home is speeded up through the power of sale clause.
In Connecticut, strict foreclosure is allowed. Vermont is the only other state where this is found. The process starts when a marshal serves you with summons, complaint and a mediation certificate. You have to fill out the forms and return to the court (and anyone else involved in the case) within the deadline, usually 15 days. One of the next steps is mediation, which can help you work out an agreement with your lender for a repayment plan.
If the judge orders a foreclosure on your property, it will either be strict foreclosure or foreclosure by sale and will depend on a number of factors, including the value of the property and whether you ask for a sale. If it’s a strict foreclosure, the judge with set a date called a “Law Day,” which is the last date you can get your home back through either paying what you owe, or selling the property or getting a loan to pay what you owe. If you don’t meet the Law Day deadline, your home is owned by the bank the next day. The other option, foreclosure by sale, is the more traditional foreclosure route where your home is sold at auction if you can’t pay the debt prior to the sale. If you prefer this option, you can file a motion for foreclosure by sale. You can ask an attorney or clerk for help with this.
Connecticut allows deficiency judgements, which is when a lender wishes to redeem the full debt. This means if your house sold at auction below the amount you owe on the note, you could be liable for the full amount if the court approves a lender’s request for a deficiency judgement. This can still happen with a strict foreclosure as well. The best bet is to hire your own appraiser if you have a dispute with the value of the property.
Connecticut Mortgage Resources
|Resource||Problem or Issue||Who Qualifies||Website|
|Connecticut Housing Finance Authority||Homeownership education, affording down payment and mortgage.||First-time homebuyers, at-risk homebuyers and current homeowners.||http://www.chfa.org/Homeownership/default.aspx|
|Connecticut Association for Community Action||Foreclosure and homelessness.||Qualifying Connecticut residents who are facing foreclosure or eviction.||http://www.cafca.org/ProgramDescriptions#Housing_and_Shelter|
|USDA Rural Development - Single family loans||Offers payment assistance to increase an applicant’s repayment ability.||Applicants must be without decent, safe and sanitary housing; Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet; Agree to occupy the property as your primary residence; Have the legal capacity to incur a loan obligation; Meet citizenship or eligible noncitizen requirements; and not be suspended or debarred from participation in federal programs.||http://www.rd.usda.gov/programs-services/all-programs/single-family-housing-programs|
|Home Affordable Refinance Program||Refinancing.||Single family homes and condos that fit within lending loan limits.||http://www.harp.gov/|
Homebuyers in the Constitution State can turn to the Connecticut Housing Finance Authority (CHFA). The organization offers programs and assistance for first-time homebuyers as well as current homeowners and those at risk for foreclosure. Find down payment assistance, mortgage programs for military, police and teachers, as well as a variety of loan programs for low income households.
Connecticut Law Help offers “free legal help for people with very low income,” which includes help for foreclosure, discrimination and other issues. If you think you’d qualify for help, you can contact the organization or use the online self-help guides provided on the website.
Moving to a rural part of the state? As long as the property is located in an eligible area and you meet the income limits, you may qualify for a USDA loan. Check the property’s location and find out more about underdeveloped, rural homeownership on the USDA website.
Serious about buying a home in this New England state? Check out Connecticut mortgage rates and start planning your move. While you’re at it, you could crunch numbers for what your paycheck will look like after the state takes a chunk of your earnings with its progressive taxes.