What are the steps involved in buying a home?
Homebuying North Carolina style: 8 steps in the journey
by Heather Benjamin
If you’re a first-time homebuyer, you might be wondering what to expect as you approach this exciting milestone. You’ve thought for a while about taking the leap from renting to owning, but a lot of questions are swirling around in your head. The good news is that the process seems a lot less scary when you know what’s actually involved. It’s important, however, to focus on the steps in order—it will minimize frustration and help you get to your goal of home ownership as smoothly and successfully as possible.
Here’s a breakdown of the steps involved in buying a home in North Carolina:
Getting a clear picture of your finances
As home ownership emerges as a goal you want to attain in the near term, begin taking a detailed look at your financial situation. Pull your credit report from the major agencies (everyone can do this for free once a year) and find your rating (many banks provide free, frequently updated ratings through your online portal). Review your financial assets and your job situation.
This can seem intimidating the first time—it’s easier just to dream excitedly about buying as much house as you can possibly afford—but being prepared with a sense of your potential budget, or what you need to do in order to start saving more toward a downpayment, will really help. Don’t forget that, in addition to the mortage payment itself, you will need funds available each year for taxes and insurance, home and yard maintenance, and unexpected repairs.
Choosing your target geographic area
Select an area in which to focus your search, because lending institutions will need a specific city or county in order to generate your preapproval, even if you later expand your search. As soon as you have a sense of where you want to live, start researching neighborhoods, because the cost of living and the range of home prices in your chosen area are a major factor in your decision-making. If you are working with a real estate agent, they can provide up-to-date market information that will help you make choices.
Here’s where you also begin making out your “wish list” for a home: number of bedrooms, square footage, special features, etc. Make it as long as you want, but define which three or four items are most important to you, in case you can’t get absolutely everything you want in one house (crazy, right?).
Obtaining a preapproval letter
It’s vital to obtain a mortage preapproval letter (or “proof of funds” document, if you are a cash buyer) before you begin looking at homes. Not only does the preapproval confirm your budget and narrow down your field of choices, it puts you in a much better position to make an offer. Many sellers require a preapproval letter to accompany an offer to purchase, and even where they don’t, you will definitely still want one when you find yourself competing against other potential buyers in a multiple-offer scenario.
It’s helpful to have your recent tax records, pay stubs, and bank account statements downloaded and ready to share with potential lenders so that you don’t have to scramble for them when asked.
There are plenty of ways to explore qualifying for a mortgage. If you don’t find the answer you’re hoping for from the first lender you talk to, don’t give up. Other lenders can usually point out different options that could work for your situation.
Once you have your preapproval, refrain from making any major purchases, opening new credit accounts, or transferring large sums from one account to another. This can make lenders very nervous, so keep everything as steady as possible until you reach the closing table.
Looking at homes
This is the fun part! It’s feeling much more real now: You’ve got your preapproval, you’ve hired a real estate broker, and you’re ready to start looking at houses. Your agent will look for homes that match your desired specifications, will research the properties so you’re armed with information going in, and will show you the houses in person (or on video, if you’re out of state). The agent will listen to your feedback and point out aspects of the home’s condition that you may want to consider.
Some buyers want to make a quick decision, while others may want to view many potential homes. There’s no wrong way to go about it. Enjoy visualizing your new life in the homes you see, but take into account practical things like HOA rules, the proximity of major roads, community amenities, nearby parks, and other aspects that would affect your daily life.
Putting in a winning offer
Depending on the market, you might find yourself needing to make a quick decision if you fall in love with a particular home. Other times, you may have a bit more bargaining power. Your agent’s expertise on the current market in that area will help, but ultimately, you decide what you want to do. Play it safe with a slightly lower offer on a home that’s sat on the market for a few weeks? Make a bold offer on a hot new listing? It’s your party.
In the offer to purchase document itself, you’ll include not just the purchase price, but what you propose to pay in due diligence and earnest money. The seller may accept your offer as is, counteroffer with terms they prefer, or decline. This process takes anywhere from several hours to several days.
This stage can be nerve-racking, but the feeling when you hear, “The seller accepted our offer!” is worth all the suspense. You’re on your way to being a first-time homeowner!
Conducting inspections
Due diligence and earnest money payments
North Carolina is an “as-is” state, which means all homes are sold in their current condition, without inspection contingencies. Instead, we use a “due diligence period,” a few weeks during which the buyer may conduct inspections to decide whether they are comfortable buying the property in its current condition. The nonrefundable due diligence payment is compensation to the seller for taking the home off the market while the buyer makes this decision. If the buyer decides to back out for any reason (or no reason) during this time period, their earnest money is refunded.
Inspections
While sellers and agents are obligated to disclose any material facts about which they should reasonably have knowledge, sellers in North Carolina have no obligation to make pre-sale repairs of any kind. That doesn’t mean they won’t respond to any repair or concession requests—just that they don’t have to. You, the buyer, should order as many types of inspections as you need to feel comfortable deciding whether you want to purchase the property.
Your agent will talk with you about which ones you want to order and answer your questions, but at minimum, you should probably get a standard home inspection, pest/termite inspection, HVAC inspection, radon inspection, and property line survey. Depending on the property and the general inspection report, you may also want a specialized or follow-up inspection of the roof, foundation, plumbing, or other aspect of the building or site.
Closing the transaction
Assuming you’ve decided to proceed with the purchase, things will move quickly.
Paperwork and transfers
Your lender will do a last review of your finances, so stay available for quick-turnaround requests for more information. The closing attorney will draw up the document known as the closing disclosure review, and your agent will review it for you as well. Check it over to make sure everything looks good, and ask questions about anything you don’t understand. The transfer of funds will take place, utilities will be set up, and homeowners insurance will be confirmed.
Final walk-through
The day before or morning of closing, you and your agent will do a final walk-through of the property to ensure it’s in the condition expected and flag anything that isn’t. Did the seller remove those dozens of paint cans from the garage as agreed? Is the property clean, the water running, and the electricity working?
Closing and recordation
At the closing attorney’s office, you will formally sign all the paperwork, which can take about an hour. You will not meet the seller at the closing table—it will be you, the closing attorney, and usually, your agent. Afterward, the attorney will take the deed and title to the county register of deeds office. Once it is officially recorded, you receive the keys to your new home!
Moving into your new home
OK, this isn’t really part of the process—this is the happy dance moment. You’re home! Even if you’re surrounded by boxes, you’re also thrilled. You’ve reached a major life goal you set for yourself. Welcome to the world of homeownership—your very own space to furnish, decorate, take care of, and make happy memories in. Congratulations!
A real estate agent can help guide you through all the steps of the homebuying process. Feel free to reach out anytime with questions—I serve as a resource for the community, whether client or neighbor. Post by Heather Benjamin, Broker/REALTOR®, Berkshire Hathaway HomeServices York Simpson Underwood Realty.