FIRST OFFER SUBMITTED
Once you decide you're ready to buy a home, it's time to set a budget. A good place to begin is by calculating your DTI ratio. Look at your current debts and income and consider how much money you can reasonably afford to spend each month on a mortgage.
Homeownership comes with several costs you don't need to worry about while renting. You'll need to pay property taxes and maintain some form of homeowners insurance. Factor these expenses into your household budget when you decide how much you can afford a house.
Mortgage lenders consider DTI an important qualifying factor. The amount of debt you have is considered a very reliable predictor of the risk associated with the approval of any mortgage loan. Therefore, it's important to know your numbers.
Your debt payments could include:
Monthly rent or house payments
Monthly child support payments or alimony
Student loan payments
Car payments
Monthly credit card minimum payments
Any other debts you might have
You don't need to add in:
Grocery bills
Utility bills
Taxes
Any other bills that may vary month to month
Next, do a simple calculation. For example, let's say your debts add up to $2,000 per month. If your monthly gross income (your before-tax income) is $6,000 per month, then your DTI ratio is 0.33, or 33%.
If you're on the payroll, you'll likely just need to provide recent pay stubs and W-2s. On the other hand, you'll need to submit your tax returns and other documents the lender requests if you're self employed.
Debt-to-income ratio (DTI) is another financial instrument mortgage lenders use to evaluate your loan application. Your DTI helps your lender see how much of your monthly income goes to debt so they can evaluate the amount of mortgage debt you can take on.
There are many ways to save for your home purchase, including through investments and savings accounts. If you have relatives who are willing to contribute money, you may be able to use gift money toward your down payment (in which case, be sure to provide your lender with a gift letter).
But how much do you need to save before buying a home? Let's look at some of the major expenses related to the purchase, and how much you might want to save for them.
Your down payment is a large, one-time payment toward the purchase of a home. Many lenders require a down payment because it mitigates the loss they might suffer in the event that a borrower defaults on their mortgage.
Many home buyers believe that they need a 20% down payment to buy a home. This isn't true. Plus, a down payment of that size isn't realistic for many firsttime home buyers.
Fortunately, there are many options for buyers who can't afford a 20% down payment. For example, you can get a conventional loan for as little as 3% down. Federal Housing Administration (FHA) loans have a minimum down payment of 3.5%. Department of Veterans Affairs (VA) loans and United States Department of Agriculture (USDA) loans even allow eligible and qualified borrowers to put 0% down.
There are advantages, however, to making a larger down payment. For one, it typically means you'll have more mortgage options. It also usually means you'll have a smaller monthly payment and a lower interest rate. Plus, if you put at least 20% down on a conventional loan, you won't need to pay for private mortgage insurance (PMI).
You'll also need to save money to cover closing costs - the fees you pay to get the loan. There are many variables that go into determining how much you'll pay for closing costs, but it's usually smart to prepare for 3 - 6% of the home value. This means that if you're buying a home worth $200,000, you might pay $6,000 - $12,000 in closing costs.
The specific closing costs will depend on your loan type, your lender, and where you live. Almost all homeowners will pay for things like appraisal fees and title insurance. If you take out a governmentbacked loan, you'll typically need to pay an insurance premium or funding fee upfront.
Before you close on your loan, your lender will give you a document called a Closing Disclosure, which lists each of the closing costs you need to cover and how much you'll need to pay at closing. Look over your Closing Disclosure carefully before you close to know what to expect and to catch any errors.
Before you can apply for a mortgage, you'll need to decide what the best type of loan is for you and which one you'll qualify for.
Conventional loans are mortgages made by a private lender and not backed by the government. The most common type of conventional loans are loans that are backed by Fannie Mae or Freddie Mac, sometimes called conforming loans. The majority of mortgages in the U.S. are conventional loans. Conventional loans are always a popular option for home buyers, and you can get one with as little as 3% down.
Backed by the Federal Housing Administration, FHA loans are less of a risk for lenders because the government insures them if you stop making payments. As a result, FHA loans have credit score requirements that aren't as strict. You can get an FHA loan with a down payment as small as 3.5%.
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help eligible veterans, active-duty service members, and certain surviving spouses purchase a home with favorable financing. Because the government guarantees a portion of the loan to the lender, VA loans often come with more flexible qualification guidelines. Many qualified buyers can purchase a home with no down payment, competitive interest rates, and no private mortgage insurance (PMI), making homeownership more accessible for those who have served us.
When you're ready to start house hunting, it's time to get pre-approved for a mortgage. When you apply, your lender will give you a pre-approval letter that states how much you're approved for based on your credit, assets, and income. You can show your preapproval letter to your real estate agent so they can help you find homes within your budget. To get pre-approved, you need to apply with your lender. The preapproval process typically involves answering some questions about your income, your assets, and the home you want to buy. Pre-approvals are a dress rehearsal for your mortgage and are necessary to make a serious offer on a home. They typically expire after 90 days and can be refreshed if you don't find the home you're looking for in that time. Know that pre-approvals don't guarantee your mortgage approval or interest rate. After you're pre-approved, avoid opening new credit lines or making large debt payments that can impact your FICO score. Working with a lender to get preapproved for a mortgage is an important step in accurately determining your budget. A mortgage preapproval will give you real numbers since the lender will have detailed info about your finances. That includes a hard inquiry, which will show up on your credit report. The good news: If you apply with multiple lenders around the same time, it'll only count as one hard pull.
Make a list of the things you'll need to have in the house. Ask yourself how many bedrooms and bathrooms you'll need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard for your kids and/or pets to play in? Once you've made a list of your must-haves, don't forget to think about the kind of neighborhood you want, the types of schools in the area, the length of your commute to and from work, and the convenience of local shopping. Take into account your safety concerns as well as how good the rate of home appreciation is in the area.
Test the plumbing
Try the electrical system
Open and close the windows & doors to make sure they work properly
Are the surrounding homes well maintained?
How much traffic is on the street?
Is it conveniently located to schools, shopping, restaurants, & parks?
Buying a home involves many moving parts, and understanding how your REALTOR® is compensated should be one of them. My goal is to make this process simple, transparent, and comfortable for you.
As of August 17, 2024, buyers working with a REALTOR® are required to have a written agreement with their agent before touring a home. This agreement outlines the services I provide and the compensation we agree upon. Buyer agent compensation is not set by law and is fully negotiable. Your agreement will clearly outline the amount or rate of compensation before we begin working together.
There are several ways buyer agent compensation can be handled:
The Seller May Contribute — A seller may choose to offer compensation toward the buyer agent's fee. This is permitted, but these offers are no longer displayed on the MLS. They can be negotiated and communicated separately.
The Buyer May Pay Directly — Depending on the transaction and the terms of our agreement, the buyer may be responsible for some or all of the agreed-upon compensation.
A Combination May Be Used — The seller's contribution and the buyer's responsibility can be considered together as part of the overall negotiation.
My job is to help you understand your options so there are no surprises. Before we begin touring homes, we will have a conversation about the services I provide, how I am compensated, and what options may be available for each property. I will always work to structure the transaction in a way that makes sense for your goals, your budget, and your overall home-buying strategy.
You deserve to know exactly what you are paying for and the value you receive in return. From identifying the right properties and arranging showings to negotiating terms, navigating inspections, coordinating with lenders and attorneys, and guiding you all the way to the closing table, I am here to represent your interests every step of the way. Let's have the conversation upfront, so you can move forward with confidence.
Before you make an offer on a house there are three key elements that you'll want to have in place before you make an offer on a house.
The first is a mortgage preapproval from at least one lender. Ideally, you should get preapproved before you start looking at houses. It can be time-consuming to pull together all the required documents, but most importantly, a preapproval lets you know how much house you can afford. Having a preapproval in hand also lets the seller know that you're serious and provides reassurance that the deal will close. That can be extra helpful in a scenario where the seller is in a hurry to move.
Second, know your market to ensure you're making a competitive offer. This can be based on comparable sales, other market information from your own research, or a comparative market analysis provided by your real estate agent. You'll probably want to make an offer that's for slightly less than your preapproval amount, which leaves room to negotiate.
Last, verify that the down payment required by your lender is in the bank and ready to go. Simply having earmarked certain assets as the funds to buy a home (including the money required for the earnest deposit, down payment, closing costs, etc.) is not enough to ensure a smooth transaction. Having direct and immediate access to the cash is essential.
FIRST OFFER SUBMITTED
ACCEPT THE OFFER
DECLINE THE OFFER
This happens if the seller thinks your offer isn't close enough to their expectations to further negotiate.
Counter
A counter-offer is when the seller offers you different terms. If this happens, you can:
ACCEPT THE OFFER
DECLINE THE OFFER
Repeat
You can negotiate back and forth as many times as needed until you reach an agreement or someone chooses to walk away.
Accepted
Once all parties agree on all the terms, you are officially under contract! CONGRATS!
Once you and the seller agree on the terms, the contract becomes effective and you are officially under contract. North Carolina's Due Diligence Period is an important part of the process and gives you time to investigate the property and decide whether you want to proceed.
Your Due Diligence Fee is paid directly to the seller and is non-refundable. If you close, it is credited toward your purchase at closing. Your Earnest Money Deposit is held by the designated escrow agent and is generally returned to you if you terminate the contract during the Due Diligence Period. Both amounts are negotiated as part of your offer.
Your Due Diligence Period is your opportunity to thoroughly investigate the property. This can include a home inspection, termite inspection, survey, septic or well inspection, HOA document review, appraisal, title search and other investigations that are important to you. The length of the Due Diligence Period is negotiated between the buyer and seller, so it is important to allow enough time to complete your investigations and address any concerns.
You know the property you want to buy and how much you'll have to pay for it. Now you'll choose a lender to get a mortgage from (you can go with a lender that preapproved you or start fresh with a different one).
Even with an online-first lender, you'll often work closely with a loan officer to complete the actual application.
This is a paperwork-heavy process, so get ready to do a lot of uploading.
Once your mortgage application is complete, you'll go into underwriting. During this process, the lender makes a final decision on whether to give you the loan - it's basically making sure there's not anything about the deal that's just too risky.
Underwriting includes digging deep into your finances, so you may need to come up with even more documents. The lender will also look at the home you've chosen via an appraisal and request a title search.
It might feel a little strange to take out an insurance policy on a home you don't actually own yet, but most lenders make securing homeowners insurance a condition of giving you a mortgage. You'll want enough coverage to fully replace the home (which might not be the same as your purchase price or the appraised value), and typically the policy should become effective on your closing date.
A basic home inspection can raise issues you might face down the road and point out any necessary repairs. This visual assessment covers all aspects of the house and its systems, from the foundation to the roof. If you have a particular concern, you may want to get one of the more specialized types of home inspections in addition to a standard inspection.
You choose the home inspector and pay for the home inspection. If it uncovers potential problems that weren't included in the seller's disclosures, you may be able to negotiate with the seller
It's extremely important not do any of the following until after the home buying process is complete:
☒Buy or Lease a Car
☒Change Jobs
☒ Miss a Bill Payment
☒Open a Line of Credit
☒Move Money Around
☒Make a Major Purchase
Any of these types of changes could jeopardize your loan approval. It's standard procedure for lenders to also do a final credit check before closing.
Title insurance protects the lender and/or homeowner from financial loss against claims regarding the legal ownership of a home.
There are two types of title insurance: one for lenders and another for homeowners. Lender's title insurance is required by lenders, but it does not cover you. A separate homeowner's policy is needed to protect yourself from a claim on your home and from being held financially responsible for possible unpaid property taxes from previous owners.
While most lenders require a title search, title insurance ensures that if anything is missed during the search, those insured will be protected if any legal issues arise.
Title insurance is generally a one-time premium paid at closing. In North Carolina, title insurance premiums are based on the purchase price and/or loan amount and are subject to rates filed with the NC Department of Insurance. The owner's policy is based on the property's purchase price, while a lender's policy is based on the loan amount.
There is no statewide rule requiring the buyer or seller to pay a particular title insurance premium. Who pays is determined by local custom and, ultimately, the terms negotiated in the purchase contract. Your closing attorney can explain what is customary for your area and how the costs will appear on your closing disclosure.
Finalize mortgage
Schedule home inspection
Declutter! Sort through every drawer, closet, cupboard & shelf, removing items you no longer need or like. Donate or sell items that are in good condition
Get copies of medical records and store them with your other important documents
Create an inventory of anything valuable that you plan to move
Get estimates from moving companies
One important difference for buyers moving to North Carolina is that real estate closings are handled by a North Carolina licensed attorney. Your closing attorney coordinates the title examination, legal documents, recording, and disbursement of funds. You also have the right to choose your title insurance company; you are not required to use one selected by your real estate agent or lender.
We will do a final walk of the home within 24 hours of closing to check the property's condition. This final inspection takes about an hour. We will make sure any repair work that the seller agreed to make has been done.
Closing is when you sign ownership paperwork.
Congratulations! Once your property has recorded with the Register of Deeds, you receive the keys to your new home! It was a lot of hard work, but you are now officially homeowners!! Time to throw a party and get to know your new neighbors!
