Congratulations on taking the first step in understanding the purchasing process – this is an extremely exciting endeavor! Although at times stressful and overwhelming, buying a home is one of the most valuable investments you will ever make and will be both fun and exciting as you go along.
There is no “one size fits all” when it comes to the real estate closing process. Every state varies in its closing requirements, so closing on a home in North Carolina will be very different than closing in other states (including South Carolina).
Step #1: Determine what you’re looking for in a home
I advise that you be as practical as possible when considering what the absolute “must-haves” are in your future home. Although having that extra bathroom or a sprawling master suite is great, it might not be in your budget. There are many different options to consider when purchasing a home, so I hope this brief list will be helpful when making those decisions:
Do you want a home with multiple acres and plenty of land? Or, are you comfortable with something on less than an acre and close to neighbors? Is a driveway a must-have? Do you prefer a condominium apartment over a house?
How far are you willing to travel to work? Is it important to be close to restaurants and nightlife or do you prefer to be in a secluded area? Are there certain school districts you want to live in? Are you comfortable with city traffic noise or do you want to be in a quiet neighborhood? Do you want to live in an area with families and young children or do you prefer to live near a younger or older age group?
Size and floorplan layout:
How many bedrooms do you need? How many baths? Is a finished basement a must-have? Do you want the whole home to be on one level or multiple levels?
Amenities and upgrades:
If you are looking for a condo, are their certain building amenities you are looking for (such as a pool, gym, etc.)? If you are buying a home, do you need a washer/dryer? Do you want a new kitchen? Is hardwood flooring throughout a must-have or are you comfortable with carpeting?
Step #2: Get pre-approved for a mortgage
Please note that getting pre-approved is not the same as getting pre-qualified. Pre-approval is a fairly easy process and will tell you exactly how much house you can afford based on your income, expenses, and more. Pre-approval carefully reviews your credit and is far more thorough than pre-qualification, which only provides a rough estimate of how much you may be able to afford.
Will getting a mortgage pre-approval affect my credit?
Yes, obtaining mortgage pre-approval will knock your credit down a few points because the lender will run a hard credit check. But bear in mind that this is an extremely important step in the purchasing process and one that will set you apart because it helps sellers know that you are a serious, motivated buyer and have the mortgage backup information to prove it. Additionally, many real estate agents will require that a buyer obtain mortgage pre-approval (unless they are a cash buyer) so that they will know the price range in which they can afford to buy.
Step #3: Hire a Full-Service Real Estate Agent
If you are considering delving into the home purchasing process without a real estate agent, I strongly advise against this. Here’s the best part about being a buyer: working with a real estate agent won’t cost you anything! The seller typically pays the real estate commission, totaling 5% or 6%, on average.
Speak with friends and family and conduct thorough research prior to reaching out to a potential real estate agent. Read their online reviews, check the content on their website and social media profiles, and ensure that your values align prior to taking this important step. You will spend a lot of time with your agent over the next few months touring homes and working through negotiations, so you want to ensure that you hire someone you trust and work well with. It is perfectly acceptable to interview more than one agent prior to deciding who to hire. Ask lots of questions during the interviews and take the time after your meeting to reflect, speak with someone close to you, and decide whether or not you want to move forward with that agent. This is an important decision that shouldn’t be rushed!
As mentioned previously in this post, buying a home is one of the most important transactions you will ever make. A lot of money is at stake and you will put yourself at major risk of leaving considerable cash on the closing table if you do not work with a real estate agent. It is also important that you do not hire a discount agent. Most discount agents do not have the tools necessary to expedite the buying process. A full-service agent, on the other hand, will try to make the purchasing process as smooth and seamless as possible and will provide insightful knowledge about neighborhoods, school districts, average home prices in the area you wish to buy, current market conditions, etc. They will also put you in contact with other professionals who are involved in the purchasing process, such as a trustworthy mortgage broker and reliable home inspector and will prepare all legal documentation and other necessary paperwork. There is a lot of legal terminologies you will be expected to understand if you do not work with a real estate agent and the seller’s agent will not have the time to explain the processes to you. Working with a full-service real estate agent will help guide you through the paperwork and will ensure you aren’t signing anything that you are not 100% comfortable with.
Step #4: Search for a home
Your real estate agent will be hard at work researching homes on the market and scheduling showing requests with the seller’s agents. You are welcome to assist in this process by looking at homes in your price range online and sending the details to your agent if you find any that you are interested in viewing.
Soon, it will be time to view homes in-person. I strongly advise being open-minded throughout this process and taking the time to carefully walk through each home. I also recommend keeping a running list on your phone of what you do and don’t like in each home you view. Hated the wall-to-wall carpeting but loved the recessed lighting? Be sure to jot that down. You will be touring various homes during this period and it is easy to get confused so it will be helpful to have a point of reference.
Step #5: Find your dream home and make an offer
Congratulations on finding the home of your dreams! Prior to putting in an offer on the home, your real estate agent will conduct thorough research on other homes that have closed in the neighborhood. If the home you wish to purchase is listed for $250,000 but most of the homes in the area that are similar in size recently sold for $220,000, you will probably want to put in an offer closer to $220,000. Alternatively, if most of the homes sold closer to $275,000, you will know you are getting a great deal by putting in an offer at the asking price of $250,000.
Step #6: Put in a purchase offer and begin negotiations
Prior to putting in an offer, I recommend asking your agent for a sample of the offer to purchase and contract documents to get an understanding of the terms and conditions both you and the seller will need to agree upon. Your real estate agent will be responsible for handling the negotiations and will ensure you are getting the greatest value. Negotiating a deal can sometimes take several days (or longer) until all parties are in agreement, so I advise exercising tremendous patience during this time. Be polite and courteous to your agent, the seller’s agents, and the sellers, and remember that your agent has your best interest at heart.
Step #7: Schedule Home Inspection
After the offer has been accepted, it’s time to schedule the home inspection and pest inspection. Unless negotiated otherwise, the cost of these inspections will be your responsibility as the buyer. However, these inspections are crucial to ensuring that there aren’t any major defects with your home. It is also very important that you schedule the home inspection prior to scheduling the home appraisal (which is different than the inspection) and obtaining mortgage pre-approval.
A home inspection carefully reviews the home and searches for any defects. An inspector will review the electrical, plumbing, roof, overall structure of the home, and more to ensure that there aren’t any problems. If all goes well and there aren’t any major issues, you are ready to obtain mortgage approval. However, if the home inspection report comes back and there are more problems with the home than you anticipated, you will have the option to back out of the deal.
It is important that you have the home inspection completed before the home appraisal and mortgage approval because the money spent on the appraisal and approval process is nonrefundable. If you choose not to move forward with buying the home, you will have obtained mortgage approval and paid for an appraisal at a loss.
Step #8: Obtain a mortgage
If all goes well at the inspection and you don’t find any major problems in the home you wish to buy, it is now time to obtain a mortgage. You will meet with a mortgage lender to discuss the various loan options that are available and assess which one makes the most sense for you. If you have a credit score of at least 620, decent income, and can afford a larger down payment, you will most-likely qualify for a conventional mortgage. Home buyers with lower credit, a small down payment, and limited income may qualify for a government loan.
A lender will almost always require a property appraisal when approving a home loan. This process typically involves examining recent home sales in the area (otherwise known as “comparables”) and comparing the sale prices to the home you wish to buy. Using the same example I mentioned earlier if you wish to purchase a home listed for $250,000 but similar homes in the neighborhood sold for $220,000, your lender might only be willing to loan you $220,000. If that is the case, it may be your responsibility to pay the remaining $30,000 out-of-pocket if don’t want to back out of the deal and the seller doesn’t want to budge on price.
Step #9: Obtain title insurance
Title insurance is a vital component to purchasing a property because it protects both you and your mortgage lender if for any reason the seller didn’t have rightful ownership of the house when they sold it. For example, you may be purchasing the home from a single woman who didn’t realize her ex-husband still co-owned the property and hadn’t signed off on the sale. Or, maybe the seller had plumbing work completed on the home several years ago but never paid the plumber for the work. As a result of the overdue payment, a lien (debt) was placed against the house. These liens stick to a house and will become the new owner’s responsibility if title insurance is not in place.
Although the chances of these circumstances occurring are fairly slim, it is still important that you protect yourself with title insurance. Without title insurance, you could lose a substantial amount of money (or the house altogether).
Step #10: Final Walk-Through
If there were any problems that came up during the home inspection that the seller agreed to fix, the final walk-through is your opportunity to ensure that everything was repaired adequately. Here is a brief list of some items that should be checked during the final walk-through:
Turn on and off all lights
Run water in all sinks and check for leaks
Test all appliances
Check garage door openers
Open and close all doors and windows
Flush all toilets
Inspect ceilings, wall and floors for any signs of water damage
Run garbage disposal and all exhaust fans
Step #11: Close on your home!
Congratulations on making it to this exciting step! Fewer days are more exciting and anxiously anticipated than closing day.
What should I expect at the closing?
You (or your mortgage lender) will provide a check for the amount that is owed on the home. The seller will then sign the deed, officially transferring ownership to you as the buyer.
Can I move into my new home directly after the closing?
Your contract will specify the exact date you can move in after closing. In some situations, you will receive the keys at the closing table and will be able to move in immediately. In other situations, the seller may request 30, 45, or 60 days of occupancy after closing on the home.
Who pays transfer tax in North Carolina?
The transfer tax is typically paid by the seller. When the ownership is transferred in the state of North Carolina, a tax of $1 per $500 is imposed on the property. So, a transfer tax of $600 would be paid by the seller on the sale of a $300,000 home.
How much time should I expect to spend at the closing?
A standard closing typically takes about one to two hours if both buyer and seller are in full agreement. However, depending on the situation, if problems arise during the closing, it can take several hours to complete.