The Buying Process

Buying a home in Eastern North Carolina is an exciting prospect. Because this will be one of the largest and most important purchases you will ever make, you need to make sure you thoroughly understand the process and what to expect. We will supply you with a great deal of resources, but understanding the steps to making the right decision is just as important as having the right information. Matt & Meredith Johnson will guide you from start to finish and ensure that you have the understanding to make the best real estate investment now and for the future.

We carry the local market knowledge and coastal real estate experience essential to understand all aspects of the area; including the environment, insurance requirements, and zoning. Whether you are buying real estate in Morehead City, Beaufort NC, Atlantic Beach, Emerald Isle, Pine Knoll Shores, Newport, Havelock, Harker’s Island, or Down East, Matt and Meredith Johnson with RE/MAX Ocean Properties are the right buyer’s agents for you. NOW……LET’S GET STARTED!

• BUY A 3-RING NOTEBOOK
• GET PRE-QUALIFIED
• KNOW YOUR AREA AND UNDERSTAND YOUR NEEDS AND WANTS
• SELECT YOUR REALTOR
• LET'S START SHOPPING
• LET'S SUBMIT AN OFFER!
• SELECTIONS AND INSPECTIONS
• COMPLETE YOUR REQUIREMENTS!
• MOVING CHECKLIST and UTILITIES
• REVIEW THE HUD-1
• FINAL WALK THROUGH
• COME TO CLOSING AND SIGN DOCUMENTS. BRING NECESSARY FUNDS TO CLOSING
• RECEIVE KEYS and MOVE-IN
• REMEMBER YOUR MORTGAGE PAYMENT DATES
• ENJOY HOME OWNERSHIP AND START BUILDING MEMORIES!

STEP ONE: BUY A 3-RING NOTEBOOK

If you cannot find one, we will make sure you have one before moving to step two. Don’t laugh….. buying a home requires paperwork and organization. It’s easier to start this way in the beginning. Put your moving checklist in your notebook.

Download Moving Checklist

STEP TWO: GET PRE-QUALIFIED

If you are planning to make the home purchase with cash funds, you can skip to step four. This step actually requires you to have contact with a mortgage broker or bank that can assist you with a home loan. It is important to understand that this is not a commitment at all, but a starting point for shopping rates and most importantly finding out the dollar amount you qualify for, determining a monthly payment you are comfortable with, and finally understanding what if anything you may do personally to improve your credit score and qualify for the best loans available. During this process, you will be asked questions about your income, your monthly expenses, your current address, and employment history. You may also be asked to supply your social security number and whose names will be on the loan. The lender will use all of this information and your credit score to determine the right loan product and purchase range for your home.
Ask the lender to supply you with a “Pre-Qualification” letter stating the amount you qualify for. Put this in your notebook and have this available in the event you decide to move forward with a purchase.

These are examples of available products and terms you may hear:

Types of Mortgages

• Fixed-Rate Mortgages
• Adjustable-Rate Mortgages
• The Convertible ARM
• FHA and VA Loan

Fixed Rate Mortgages
Consider a fixed rate mortgage if either of the following describes you:

• You plan on living in your new home for many years, and/or
• You are not a risk-taker and prefer the stability of knowing how much your payment will be each month.

Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner.

This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you'll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you'll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.
The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:

15-Year Fixed-Rate

• Pay off the loan in half the time of a 30-year loan
• Equity builds up more quickly than in a 30-year loan
• Payments are higher (which may be a problem if you lose your job or become unable to work).
  

30-Year Fixed-Rate:

• The most common choice, especially for first-time homebuyers, as it's the easiest of the fixed-rate loans to qualify for
• Monthly payments are lower than for 15-year and 20-year loans. This can prove especially helpful if you do not have a lot of "padding" between the amount you can afford to spend and the monthly payment for your desired property
• More desirable if you plan on staying in the same home for years. Equity in a 30 year fixed rate loan builds at a slower rate than the equity in a short term loan because you are paying off the home over a longer period of time
• For income tax purposes, this term provides the maximum interest deduction.

Government Loans
Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.

• VA Loans: Veterans may qualify for a loan from the Veterans Administration. These loans are very common in our area. They are attractive for qualified veterans because they require a lower down payment than most fixed rate conventional loans
• FHA Loans: The Federal Housing Association offers loans to lower-income Americans. Look for the phrase "FHA approved" when looking at ads for homes
• USDA Loans: Provided by the United States Department of Agriculture these loans are intended for rural areas. Many areas in and around Eastern North Carolina qualify for these loans. They are attractive to buyer’s because they provide 100% financing to those who qualify.

Adjustable-Rate Mortgages (ARMs)

If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.

Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.

Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.

Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.

Fortunately, the amount an ARM can increase is limited. There are "caps" on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you'll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.

Convertible ARMs
If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.

STEP THREE: KNOW YOUR AREA AND UNDERSTAND YOUR NEEDS

This step does not include shopping for homes, but instead analyzing what you may want or need in a home. Is this going to be long term, short term, or an investment? Do you need anything specific like handicap access, storage requirements, room for elders, single levels, etc. These are not wants, but specific requirements that cannot be varied. For most folks there are few initial restrictions other than price and numbers of bedrooms and baths. Go ahead and make a list and put it in your notebook.

Also, drive around the area and explore. Go down side streets and be aware of your surroundings. Look for shopping, hospitals, schools, and restaurants. Find the parks and other areas or interest. Of course a local map can be useful and can be picked up from Matt or Meredith at our office or at any of the local visitor’s centers. Matt and Meredith will be happy to accompany you to give you the “local” tour.

STEP FOUR: SELECT YOU REALTOR

You may already have a relationship with a Realtor at this point, but if not this is a good time to select and employ a local Realtor.

Related Forms:
Disclosure form - Working With Real Estate Agents. pdf
Right To Represent Buyer. pdf (protects you and the agent's best interests when working together to buy a home or land)

“When buying or selling real estate, you may find it helpful to have a real estate agent assist you. Real estate agents can provide many useful services and work with you in different ways. In some real estate transactions, the agents work for the seller. In others, the seller and buyer may each have agents. And sometimes the same agents work for both the buyer and the seller. It is important for you to know whether an agent is working for you as your agent or simply working with you while acting as an agent of the other party.”

Here are a few benefits of working with a Realtor –

• It’s FREE! A Realtor’s fee (commission) is typically paid by the seller
• Realtors have access to the MLS (Multiple Listing Service) which includes a database of the most updated list of available homes. This subscribed service also provides relevant information to Realtors regarding special instructions and features that may not be available through other Real Estate websites
• A Realtor is committed to getting you the best price and terms. This is their duty as your buyer’s agent.
  · A Realtor can supply you with a CMA or market value report of the homes that interest you. This insures you a fair market price and helps tremendously in negotiations
• A Realtor can negotiate all terms and conditions of the purchase including appliances, home warranties, closing cost assistance, and more
• A Realtor will lead you from Contract to Closing and manage the process while helping you understand you the fees involved with Home Inspections and other services that may be necessary
• Provide you with lists of local inspectors, attorney’s, and other professional services that may be required to complete the transaction.

In North Carolina, Realtors are required to provide their clients a “Working With Real Estate Agents” Form which is a disclosure form that describes “Agency” and agent duties as they represent their clients

Buyer’s may also sign a “Buyer’s Agency” Form which creates an exclusive relationship between the buyer and the agent. This protects your interests through the buying process and also the Realtors valuable time and resources as you become their client. This form typically corresponds to a certain area or county and a specific amount of time. You will be provided with copies of these forms for your notebook.

STEP FIVE: LET'S START SHOPPING

You know the area, you know your specific needs, you have been pre-qualified for the loan, selected your Realtor, and now it is time to find your new home. Your Realtor will need to know your price range, bedroom and bathroom requirements, and other criteria with the features you would like to find. In our Coastal Region this can include water access, neighborhood swimming pools, golf courses, lot size, boat slips, waterfront, water views, and more. The more specific the information you can provide, the narrower the search results will become. Your Realtor will provide you with lists of homes to review and you will select the homes you would like to visit. Print these listings and place them in your notebook. Make notes of likes and dislikes after viewing each home as this will help you reference them later. You may also find homes on your own by searching the Internet, www.ncoceanproperties.com, or by driving by certain homes. You will provide this information to your Realtor by giving them the property address or MLS ID#. Your Realtor will set appointments and accompany you through each of the homes. They can provide you with additional information on the homes you find appealing. This information could include monthly utility bills, insurance rates, Home Owner Association fees, tax rates, roof age, etc. This information can used to make an informed decision on the purchase price and monthly expenses.

Once you decide on a home, your Realtor will provide you with Market Analysis of comparable “SOLD” homes in the area. This gives us the information to make an offer on the home.

STEP SIX: LET'S SUBMIT AN OFFER!

Sample Forms
Residential Property Disclosure .pdf
Offer to Purchase and Contract .pdf

We are ready to make an offer. We have found a home, we know what to expect, we have reviewed the “Residential Property Disclosure”, and we are ready to move forward. In North Carolina, most offers are presented using the Offer to Purchase and Contract Forms,” provided by the NC Real Estate Commission. As we complete the offer, we will discuss the following items:

• Offer Price – Our initial offer price for the home – this offer may be accepted, or it may be counter-offered several times before reaching an agreement on price and terms
• Amount of earnest money offered. Earnest money is “good faith” money presented to the seller which shows your intent to complete the purchase once all the conditions of the offer are completed. This money is deposited only when an offer is accepted. This money is applied to the total purchase price of the home at the time of closing. You Realtor will explain to you how earnest money may be distributed in the event the transaction is not completed
• Type of loan – conventional 15 year or 30 year, cash, VA loan, FHA loan, USDA loan, owner financing, etc. Loan rate and percentage of down payment
• Type and dates of inspections – We highly recommend a Home Inspection to be perfomed by a licensed home inspector. They will provide you with a detailed report on the working conditions and maintenance of the home. This report will be used to negotiate repairs that may be necessary before purchasing. A wood destroying insect inspection may also be recommended. A home inspection report may range from $250.00-$500.00 and a pest inspection around $80.00. These are usually paid buy the buyer at the time of the service
• Negotiated furnishing, appliances, and other household items
• Closing Date – this is when you plan on taking possession
• Names the Property Deed – Whose name is on the recorded deed?

· There will be other items to discuss depending on the age, location, and type of homes.

Your Realtor will present the terms of the offer and communicate any negotiations on your behalf. Once the buyer and seller agree on all pricing and terms, you will be “under contract” and the contract to closing process begins. Keep a copy of the contract in your notebook!

STEP SEVEN – SELECTIONS AND INSPECTIONS

Questions and Answers on Home Inspections Brochure .pdf

It is now time to select your inspectors (home inspector, pest inspector, pool, well, or septic tank inspector if necessary), closing attorney, lender, home insurance company, movers if necessary, home warranty company if necessary, and more. You can review the “Questions and Answers on Home Inspections” brochure to help you understand the home inspection process. Your Realtor will manage this process and adhere to the dates and guidelines described in the Contract. There may be additional negotiations between the buyer and seller pending the findings during the inspections.

Your Realtor will provide your closing attorney and lender with copies of the contracts so they can begin their work on the loan, title insurance and deed preparation.

All of these decisions will be on forms and ready to store in your notebook!

STEP EIGHT – COMPLETE YOUR REQUIREMENTS!

Everyone is working toward a smooth transaction and so are you. You will provide your lender with everything they require to process your loan. Be prepared to provide 3 years of tax returns, bank statements, any stock or savings account statements, pay stubs, and other financial documents that may be relevant to your qualification. The lender will provide you with a list of all the documentation they require.

You will also be responsible for contacting and acquiring home owner’s insurance, wind and hail insurance and flood insurance (if applicable) for your new home. This policy must be in effect prior to closing.

STEP NINE – MOVING CHECKLIST & UTILITIES

Review your moving checklist and make sure your mail is forwarded to your new address. Also make sure you have contacted all relevant utility companies and your accounts are ready to be activated when you close on your home.

Click here to view Moving Checklist .pdf

STEP TEN - REVIEW THE HUD-1

The HUD -1 is a form used in Real Estate transactions to record all of the settlement charges for both the buyer and the seller. In essence this is your “bill”. Each HUD-1 is different based upon you purchase price, type and amount of loan, time of year you are purchasing (taxes due), and banking / loan fees. We have included a sample HUD-1 form filled in with reasonable numbers in the categories that most commonly pertain to Real Estate Purchases. You will receive your own HUD-1 form prior to closing. We review this form for accuracy and also for determining the amount of funds needed to be brought to the closing itself. Your Realtor can explain line by line what these charges relate to. You will also review this with your closing attorney to make sure you understand each charge listed.

Download Sample HUD-1 Form.pdf
Download Blank HUD-1 Form .pdf

STEP ELEVEN – FINAL WALK THROUGH

Sometimes this step comes before you receive the HUD-1 statement; however it is typically very close to the closing date. This step is to verify that the home has been left in the condition it was when originally shown and to make sure any agreed repairs or charges have been completed. Any appliances or personal items that were to stay should be in place as understood from the offer to purchase. Also, you will want to make sure that all the fixtures that were to stay are there as well. This includes the mailbox, planted landscaping, etc. You may refer to the “fixtures” paragraph in your Offer to Purchase document for a definition of a fixture. At this point you should be excited as you will be moving in soon!

STEP TWELVE – COME TO CLOSING AND SIGN DOCUMENTS. BRING NECESSARY FUNDS TO CLOSING.

The day is here and we are ready to close on your home or property. Arrive on time as your closing attorney has scheduled appointments throughout the day. Your Realtor may also recommend meeting you before the closing to answer any last minute questions and make sure you both arrive on time. You will review the HUD-1 statement with your attorney and also have an opportunity in some cases to ask the seller relevant questions about the home. You will sign the HUD statement and move forward with your closing and loan documents. Your attorney will take you through each form and answer your questions as you are signing. Once you are done you will provide the attorney with the amount of funds shown on the HUD-1 form (due from buyer). You will need to bring these funds in the form of a certified check or money order. Make sure you have a copy of your funds and the closing documents. Go ahead and put these in your notebook.

STEP THIRTEEN – RECEIVE KEYS & MOVE-IN

Paperwork is out of the way and all of your questions are answered. The attorney will let you know when the “deed” will be recorded and officially make you the new owner. You will receive the keys, and any other relevant items for the home. You may want to make copies of the keys on your way home if you need more. Now it’s time to move in and enjoy.

STEP FOURTEEN – REMEMBER YOUR MORTGAGE PAYMENT DATES

The closing attorney will discuss with you the date that your first mortgage payment is due. Your lender will typically provide you with a payment coupon book, but in the even it does not arrive on time, make sure you don’t forget that first due date. You will have other things on your mind like furniture and friends so we don’t want that payment to slip your mind. Go ahead and make that on your calendar before you put you notebook away.

STEP FIFTEEN – ENJOY HOME OWNERSHIP AND START BUILDING MEMORIES!