Step 1: Contact a Mortgage Lender / Broker
Your first step is to contact a mortgage broker or lender to determine how much you can afford to spend on a home. Your lender will ask for your income, expenses, and how much you would like your down payment to be. Your lender will also advise you about which type of loan is right for you.
You can also go to a mortgage calculator to see what your principal & interest payment will be based on various loan
amounts and interest rates.
Most buyers obtain mortgages from a mortgage company, mortgage broker, credit union, or local bank / savings & loan association. The qualifying guidelines and required down payment vary with different types of loans so you will need to talk with a qualified lender to obtain the most current information at the time of purchase.
Ask for a Good Faith Estimate of Closing Costs from each lender you visit and for each loan option they are offering so you can more easily compare your choices.
MORTGAGE TYPES
Conventional
These are the most common types of loans.
They are offered by banks and lenders, and the property is held as
security for the loan.
FHA
(Federal Housing Administration)
(Federal Housing Administration)
The FHA will insure the loan for the lender in case the buyer cannot make
payments. It requires the buyer to pay
mortgage insurance through the FHA. The FHA offers loans with as little as a 3.5% down payment.
VA (Veterans Administration)
The VA will guarantee mortgages offered by private lenders to members of the
armed forces, active military personnel, veterans, or their widows/widowers.
RATE TYPES
Fixed Rate Mortgage
The interest rate stays the same for as long as you hold your mortgage, no
matter how interest rates change in the marketplace. Most fixed-rate mortgages are for 15 or 30 years. With this type of mortgage, you will know exactly what your principal and interest payment will be for the term of the loan (note that taxes and homeowner’s insurance rates may change from year to year which will change your payment amount).
Adjustable
Rate Mortgage (ARM)
The interest rate on an ARM is usually tied to an index, such as the prime rate. The rate can go up or down at specified intervals. For example, a 3/1 ARM is fixed for the first 3 years, then adjusts every year based on an index. Make sure you find out how often the rate can be adjusted and if there is a cap (limit) on the adjustments.
Balloon Mortgage
These mortgages are offered for a shorter time period such as 5 or 7 years, but the payments made are based on what you would pay for a 15 or 30-year loan. They have a final, large payment at the end of the term so you will either need to sell your home before the
payment is due or refinance the loan. Some balloon mortgages allow you to extend the mortgage based on rates at the end of the loan term.
Interest-Only Mortgage
A mortgage is “interest only” if the scheduled monthly mortgage payment consists of interest only. The option to pay interest only lasts for a specified period, usually 5 to 10 years. Borrowers have the right to pay more than interest if they want to. Your payments will be much lower than other types of mortgages, but your debt will never be paid off. Many interest-only mortgages require you to start paying both principal and interest after a certain amount of time. This means that your payments will now be much higher than if you had been paying both principal and interest all along.
This type of loan is extremely risky and should be used only in special
circumstances.
ADDITIONAL MONTHLY COSTS
Be sure to include estimates of homeowner’s insurance, property taxes,
and other monthly costs in the calculation of your monthly payments.
Homeowner’s Insurance usually costs about $3 for every $1,000 of the cost of the home ($600/year for a $200,000 home).
Property Taxes tend to range from 1.2 percent to 2 percent of the cost of the home ($2400 to $4000 for a $200,000 home).
Flood Insurance: If you live in a flood-prone area, your lender will usually require you to carry a flood insurance policy.
Mortgage Insurance: Generally required if you are putting down less than a 20% down payment, unless you are taking out a 2nd mortgage to cover your down payment (called a piggyback or 80/20 loan). The amount of insurance required depends on your credit score, amount you put down, and the price of the house.
Association Dues:
If you are buying a townhome or condo, be sure to include the monthly dues when calculating your payment amounts. These usually range from $100-$200/month.
Many single-family detached home neighborhoods also have dues to cover maintenance of common areas, pool clubs, etc. These generally range anywhere from $10/month to $100/month, depending on the services provided.
SHOULD I SELL MY HOME FIRST?
If you have a home you need to sell, you will need to think about timing. If you decide to sell your home before buying a new one, you many need to find somewhere to live while you are between homes. If you decide to buy first, you risk having two mortgages if your current home doesn’t sell quickly. Talk to your lender about your options before making a final decision.
Step 2: What Type of Home Do I Want?
Step 2: What Type of Home Do I Want?
Would you like a single-family detached home, townhome, or condominium? As the owner of a single-family home, you are responsible for all yard work, maintenance costs etc. As the owner of a townhome or condominium, the homeowners’ association will cover many of the maintenance expenses (such as landscaping, roof, siding, etc.), but you will need to pay a monthly fee.
Some single-family detached homes also have a homeowners’ association with a monthly fee. This will usually cover the costs of maintaining all community common areas, sidewalks, lighting, etc. Sometimes it will also cover membership to a swim and/or tennis club. Keep all of these monthly fees in mind when you are comparing homes.
You should also think about how long you plan to be in a home. Will the home still meet your needs in a few years? If you think you may need a larger home in a few years, decide if you would prefer to buy a smaller home now to save up money for a larger home or if you would rather buy a larger home now and avoid moving again.
FEATURES CHECKLIST
- Location / Neighborhood / School District?
- Style (1-story, split-level, contemporary,bungalow, etc.)?
- Size (square footage)?
- Number of Bedrooms / Bathrooms?
- Formal Living / Dining rooms?
- Garage or Carport?
- Fireplace?
- Size of yard?
- Age of home?
- Other amenities?
Step 3: Call Pat - 919-452-3416
Step 3: Call Pat - 919-452-3416
I pledge to do the following:
- Set up custom searches for you and automatically notify you when homes matching your criteria become available. I can show you ALL homes that are for sale, even those listed with other companies, for sale by owner (FSBO), and new homes being sold by builders.
- Recommend a lender to get you pre-qualified so you know exactly how much you can afford.
- Ask you way to many questions, so that I know you are arriving at the answers that are right for you, your family and our financial well being.
- Help you undertand the pros/cons of each home, help you determine what price to offer on a home, & present and negotiate the offer. The home must be right for you and your future.
- Provide you with a “Buyer’s Contract-to-Closing Checklist” so you know exactly what to do once you are under contract on a home.
- Order all inspections for you and negotiate repairs on your behalf.
- Schedule the closing with an attorney and arrange for the attorney to do a title search.
- Review the settlement statement with you so you understand all of the closing costs and know how much money to bring to closing.
- Accompany you to the closing and arrange for you to get the keys to your new home.
- Be available for any questions you have during your home search, the closing process, and even after your closing.
PREVIEW NEIGHBORHOODS
Before making appointments to see homes, you may want to drive around the neighborhoods that are in your price range to get an idea of the area, distance to work/school, etc. Once you’ve narrowed down the list of homes you would like to see, contact me in order to set up appointments.
WHAT YOU CAN DO
- Give me as much information up front as you can on your wants, needs, children, financial picture, likes, dislikes, “must haves” and “don’t wants”.
- Schedule meeting with me as far in advance as possible. If you have to sell before you buy, let’s talk! We’d hate for you to come in, find the perfect house, then not be able to buy because you have to sell your current home first.
- Meet with a mortgage lender or broker before looking at homes. You’ll want to know what you can afford before you fall in love with a home that’s over your budget.
- Talk as we look around. Really let me know what works & what doesn’t, what concerns you, what questions you have. Express your joy and your fears. Buying is as much emotion as logic. You may want to take notes about each home so you can remember the details later.
- Expect that what you want in a home will change. This is quite natural. As we see more homes and different attributes, you will change your mind and share that with me.
- Bring measurements of big furniture items, fabric swatches, etc. to each appointment.
- Let everyone know (friends, other agents, etc.) that I am your “Buyer’s Agent”. Give them all my phone number so they can call me if they know of or see something you might like. The best thing about looking with a Buyer’s Agent (or agents) is that I will help you find the best home for you, rather than try to sell you something before someone else does.
- Go ahead and listen to all of the pluses and minuses that everyone you know has expressed about the different areas, schools, neighborhoods… but don’t be over-influenced. Nothing worse than an opinion without the gift of experience. Check out all the facts before you decide. Your needs are probably different than anyone else’s – together we’ll tailor a search for you and your family!
Step 4: Make an Offer
Step 4: Make an Offer
Once you have found a home you would like to purchase, I will assist you in filling out an Offer to
Purchase. Usually the seller will request that a pre-qualification letter from your lender be included with the offer or be provided soon thereafter.
BRING YOUR CHECKBOOK
You will need to make a check payable to the listing company for earnest money. This check WILL BE CASHED and placed in the
listing company' s escrow account as soon as the contract is signed. You may write a check directly to the seller as a Due Diligence fee.
FILLING OUT THE OFFER TO PURCHASE
How Do I Know What to Offer?
I will research recent sales in the neighborhood to help you determine what price to offer
based on the sold prices of similar homes.
Due Diligence Fee vs Earnest Money:
The Due Diligence Fee is also referred to as the "look-see fee" and is non-refundable fee that allows the buyers a set amount of time to make a decision about whether to move forward with the purchase of the home. All inspections, repair requests, and loan conditions should be completed before the due diligence date. Earnest money is an additional deposit given by the buyer as good faith money. This deposit is refundable, but only before the due diligence date. It gives the seller some peace of mind because the buyer will have something to lose if they break the contract after the due diligence date. Both the due diligence fee and the earnest money deposit get credited back to the buyer at closing.
Fixtures/Personal Property:
Any items of personal property that you would like to be included with the
property should be itemized in the contract.
Items generally included in the purchase of a home: stove, dishwasher, built-in microwave, blinds, bathroom mirrors, curtain hardware, and garage door openers.
Items generally NOT included: refrigerator, washer, dryer, or curtains.
Closing Date:
Many buyers like to close toward the end of the month because less interest
on your new loan is due at closing. For example, if you close on September 30th, you will owe interest for only 1 day. Your first mortgage payment will be due on November 1. If the closing is just 2 days later (October 2), you will owe 30 days’ worth of interest, but your first mortgage payment won’t be due until December 1.
Closing Costs Paid by Seller:
The buyer has the option in the offer of asking for the seller to pay a certain dollar amount toward the buyer’s closing costs. Remember that this will reduce the net to the seller thusmaking it less appealing to the seller.
Negotiating:
The seller may accept the offer in its original form by signing it, thereby converting the Offer into a Sales Contract. The seller may decide to change the original offer, thereby creating a counter-offer. The sales contract is binding only when all terms are agreed upon by both parties and in writing. There is no “first come, first served” in the case of multiple offers. A seller has the right to accept, reject or counter any offer. There are no time limits on this process unless specifically stated. Any offer/counter-offer can be withdrawn before it is signed by the other party.
Step 5: We Have a Deal - What's Next?
After the buyer and seller have come to an agreement on the contract terms, it is time to apply for the loan, schedule the closing and inspections, and start packing!
Loan Application:
The buyer can expedite the loan process by having all pertinent information with him/her at the time of application: Assets and liabilities, salary history, bank and credit card account numbers, rental history and other credit references, tax returns, etc.
Closing Attorney:
The closing is both technical and complex and is usually handled by an attorney chosen by the buyer. I will be happy to recommend attorneys and set up the closing for you.
Hazard (Homeowner’s) Insurance:
Check with different insurance companies to compare rates and plans and let me and your lender know whom you have selected.
Schedule Inspections:
The whole house inspection is usually done by a licensed inspector of the buyer’s choice. It is HIGHLY recommend. You must also order a required wood-destroying insect (termite) inspection. The home inspector may suggest additional specialized inspections.
** The cost of all inspections is the responsibility of the buyer
unless otherwise stated in the contract.
Negotiate Repairs:
Once inspections have been completed, the buyer will fill out a repair request that gets submitted to the seller. The seller has the option of agreeing to complete all or some of the repairs, offering money to the buyer in lieu of repairs, or refusing to complete the repairs. If it is before the due diligence date, the buyer has the option of either accepting the property in its present condition or terminating the contract and getting a return of the earnest money.
Survey:
If required by the lender or desired by the buyer, a survey of the property can be obtained by a registered land surveyor. The survey and report will reveal any encroachments, will show the property boundaries, and will show the precise location of the home and other improvements on the property. The attorney usually orders the survey if requested. Most attorneys recommend having a survey done.
Survey:
If required by the lender or desired by the buyer, a survey of the property can be obtained by a registered land surveyor. The survey and report will reveal any encroachments, will show the property boundaries, and will show the precise location of the home and other improvements on the property. The attorney usually orders the survey if requested. Most attorneys recommend having a survey done.
Appraisal:
The lender will select a certified appraiser to assess the value of the home in order to make sure the sales price is not more than the appraised value. If that occurs, the contract can be re-negotiated, the buyer can terminate the contract, or the buyer can choose to use cash to make up the difference between the sales price and appraised value.
Home Warranty:
You may want to consider purchasing a home warranty. A home warranty is a service contract typically lasting one year that covers the repair or replacement of major home systems and appliances that break down due to normal wear and tear. A home warranty does NOT overlap or replace the homeowner’s insurance policy. Generally, home warranties cover malfunctions of ovens, built-in dishwashers and microwaves, garbage disposals, water heaters, ductwork, plumbing, electrical system, heating, and air-conditioning. For additional fees you can add refrigerators, washers, dryers, or other items not covered under the basic plan. Check each company to compare coverage & terms. Warranties usually cost between $400-$500 per year and $50-$75 per service call depending on which plan you purchase.
Transfer Utilities:
A few days before closing, contact all utility companies and have the utilities transferred into your name as of the closing date. These may include electric, natural gas, water/sewer, propane, garbage pickup, etc. I will be able to provide you with contact information.
Re-inspection and/or Final Walk-thru:
The buyer may opt to have the inspector come back after repairs have been completed to do a re-inspection and make sure repairs were done properly. The buyer will also want to take a look at the house right before closing to make sure it is in the same (or better) condition than at time of offer.
Step 6: Closing the Sale
Step 6: Closing the Sale
The closing is generally held at the buyer’s attorney’s office. Closing is when the buyer signs all financial documents and receives assurance that all terms of the contract have been met. The attorney informs the buyer of all rights and obligations being incurred and reviews the settlement statement with the buyer. Closing constitutes acceptance of the property in its current condition. All utilities must be transferred to the buyer’s name as of the closing or occupancy date.
Closing Attorney’s Duties:
The closing attorney also performs a title examination, which involves an extensive review of the public records for those matters which affect the property such as mortgages, judgments, liens, unpaid taxes, assessments. The examination does not include matters not appearing on the public records, such as the physical condition of improvements, unfiled contractors’ claims, zoning ordinances, or unrecorded leases.
Deed:
Title to real property in North Carolina
situated. Approximately 30 days after closing, the buyer should receive the original deed from the Register of Deeds’ office and the title insurance policy from the insurance company. The seller often will execute (sign) the deed prior to closing and may choose to not attend the closing.
Affidavit of Lien Waiver:
At closing you will also receive an Affidavit of Lien Waiver from the seller. This offers further assurance to the buyer that any contractor who worked on the property has been paid and that if any monies are outstanding, it is the responsibility of the seller to pay.
TYPICAL BUYER'S CLOSING COSTS INCLUDE:
Origination Fee:
Most lenders charge 1% of the new loan amount as a fee for processing the loan. This processing fee may instead be a fixed dollar amount, or a percent plus fixed amount.
Credit Report: ($50-$75)
A report of the buyer’s credit history is ordered by the lender.
Discount Points:
The buyer may elect to pay 1 or more points to lower their interest rate. Each point equals 1% of the loan amount.
Mortgage Insurance Premium (MIP or PMI):
This is usually required for mortgages where the buyer’s down payment is less than 20% of the sales price. MIP protects the lender in the case of a buyer’s default. The cost will depend on the buyer’s credit score, amount of the down payment, and the price of the house.
Title Insurance:
The policy usually costs approximately $2 per $1,000 of sales price and is a one-time fee. Most lenders require title insurance for their protection and the buyer may purchase his own policy. This insurance provides protection from risks not disclosed by public records and from errors or omissions made by the attorney or surveyor.
Recording Fees:($50-$100)
These are the fees for recording the deed, deed of trust, and other documents
These are the fees for recording the deed, deed of trust, and other documents
with the Register of Deeds.
Escrow Account: The lender will require that a deposit of 2-6 months of
taxes and homeowner’s insurance be put into a separate account. This money will be used to pay the following year’s taxes and hazard insurance.
taxes and homeowner’s insurance be put into a separate account. This money will be used to pay the following year’s taxes and hazard insurance.
Interim Interest: Interest is collected on the loan from the date of closing
through the end of the month in which the loan is closed.
through the end of the month in which the loan is closed.
Hazard (Homeowner’s Insurance): Usually costs about $3 per year
for every $1,000 of the home’s value ($600/year for a $200,000 home). The buyer
for every $1,000 of the home’s value ($600/year for a $200,000 home). The buyer
will be required to pay 1 full year of hazard insurance at closing.
Taxes:
Each party will be charged his/her proportionate share of property taxes. If the seller has already paid the taxes for that year, the buyer will pay his proportionate share of the taxes to the seller. If the seller has not paid the taxes, the seller will pay his proportionate share to the buyer and the buyer will pay the entire tax bill when it becomes due.
Survey ($250-$350)
Closing Attorney ($500-$700)
Whole House Inspection ($350-$550)
Termite Inspection ($70-$80)
WHAT DO I BRING TO CLOSING?
(1) Payment:
The buyer will bring a certified or bank check made payable to the closing
attorney’s firm. The amount of the check equals the down payment plus all
closing costs, less the earnest money on deposit. The attorney should know this amount the day
before closing.
(2) Driver’s license or other form of legal photo ID.
WHEN DO I GET THE KEYS??
Once the funds have been received from the lender & the buyer and the attorney has recorded the deed, the home is now yours! The seller may choose to turn over the keys at closing or elect to wait until after the deed is recorded.
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