Buying a home is an exciting time in your life. Home ownership is one of the best investments you can make. How do you ensure that when the time is right, you are in the best position to buy?
1) Don’t assume that you need 20% down
It’s a common misconception that you must put 20% down to buy a home. A larger down payment WILL help you get a better rate, lower your monthly payments & increase your equity, so if you can do it, then it's a great choice. However, you can buy a home for as little as 3% down. Different loans have different requirements.
2) Start saving well in advance
Saving early on allows you to contribute more overall. You will need cash upfront to cover your down payment, closing costs (loan origination fees, title insurance, pre-paid taxes, home insurance, etc.) and the overall cost of moving. Consider a separate savings account in which you automatically sweep money into each month to build your savings quickly.
3) Buy only what you can afford
It’s always exciting to get pre-approved for a higher amount than you thought possible. However, think carefully about your lifestyle- do you like to travel, eat out, have monthly expenses for clubs, etc. If you buy LESS than you are approved for, you can enjoy those things, stress-free.
4) Consult with a few different lenders.
Do not assume they all have the same programs available to them. This is really one of the best things you can do before you even begin saving. They can take a look at your monthly expenses and advise you on how best to build up your credit. Find one who offers great programs and is responsive. Once you have the money you need to buy, get the pre-approval from your lender before you start looking.
5) Check into First Time Home Buyer assistance
Many are unaware of the federal and state housing programs available to them. Programs such as FHA and USDA offer opportunities and education for buying a home.
6) Interview a few Realtors®.
Utilize referrals to find a couple of realtors to talk to about helping you find a home. An experienced agent is a huge resource for you. They can find you even off market properties, and have ‘non-googleable’ knowledge of what is going on in each market. Can you use a new agent? Sure! But make sure they have a leader or mentor working with them to support them. Newer agents often have more time to spend looking at properties with you, too. Make sure the agent you hire understands the nuances of the markets you are looking at and is nice to be with- you will spend a lot of time together!
7) Buy with the future in mind
While the next home you buy doesn’t need to be your ‘forever home’, it does have to work for you and your potentially changing lifestyle for a few years (adding to the family, etc.). Balance your long term goals with what you can afford to find the best home for you.
8) Tour neighborhoods you are interested in
Talk to the neighbors in these neighborhoods. See how far it is from places you like to frequent.
It’s a common misconception that you must put 20% down to buy a home. A larger down payment WILL help you get a better rate, lower your monthly payments & increase your equity, so if you can do it, then it's a great choice. However, you can buy a home for as little as 3% down. Different loans have different requirements.
2) Start saving well in advance
Saving early on allows you to contribute more overall. You will need cash upfront to cover your down payment, closing costs (loan origination fees, title insurance, pre-paid taxes, home insurance, etc.) and the overall cost of moving. Consider a separate savings account in which you automatically sweep money into each month to build your savings quickly.
3) Buy only what you can afford
It’s always exciting to get pre-approved for a higher amount than you thought possible. However, think carefully about your lifestyle- do you like to travel, eat out, have monthly expenses for clubs, etc. If you buy LESS than you are approved for, you can enjoy those things, stress-free.
4) Consult with a few different lenders.
Do not assume they all have the same programs available to them. This is really one of the best things you can do before you even begin saving. They can take a look at your monthly expenses and advise you on how best to build up your credit. Find one who offers great programs and is responsive. Once you have the money you need to buy, get the pre-approval from your lender before you start looking.
5) Check into First Time Home Buyer assistance
Many are unaware of the federal and state housing programs available to them. Programs such as FHA and USDA offer opportunities and education for buying a home.
6) Interview a few Realtors®.
Utilize referrals to find a couple of realtors to talk to about helping you find a home. An experienced agent is a huge resource for you. They can find you even off market properties, and have ‘non-googleable’ knowledge of what is going on in each market. Can you use a new agent? Sure! But make sure they have a leader or mentor working with them to support them. Newer agents often have more time to spend looking at properties with you, too. Make sure the agent you hire understands the nuances of the markets you are looking at and is nice to be with- you will spend a lot of time together!
7) Buy with the future in mind
While the next home you buy doesn’t need to be your ‘forever home’, it does have to work for you and your potentially changing lifestyle for a few years (adding to the family, etc.). Balance your long term goals with what you can afford to find the best home for you.
8) Tour neighborhoods you are interested in
Talk to the neighbors in these neighborhoods. See how far it is from places you like to frequent.
Hopefully these tips will help you get excited about your home buying adventure! We are ready to help at Hayes Collaborative when you are!
Understanding the Contract
Buying a Home? Here is what you need to know about the NC Offer to Purchase and Contract
Every industry has their terminology that can be confusing to someone outside of their business.
Real Estate is no exception. Be prepared in advance by having a clear understanding of what you can expect to see when you make an offer.
There are some basic elements to the contract and there are terms you will want to know.
Price: That is the price you are offering for the property under consideration. While there may be other terms affecting the offer, every seller wants to know the price offered first.
Closing Costs: Are you asking the seller to provide you with some closing cost credit. Depending on the current market, you may be able to negotiate some closing costs from the seller. Effectively, this is an amount that is deducted from the seller’s proceeds. Also, your lender may tell you there is a maximum that you request, so check with your lender first.
Down Payment: In North Carolina, there are 2 places on the contract to be aware of regarding ‘down payment’ in a resale transaction. They are both a negotiable amount,
Due Diligence- That is money you are paying directly to the seller upon acceptance of the offer when it becomes a valid contract. That is due and payable immediately upon contract acceptance. Due Diligence amount vary considerably depending on the current market conditions, the neighborhood or town, as well as the competition for the property. The key things to understand about Due Diligence money is that it is deposited by the seller into the seller’s account and is NON-REFUNDABLE if you should change your mind during the Due Diligence period for any reason or no reason at all but DOES CREDIT toward the purchase price if you complete the transaction. The purpose of the Due Diligence amount is to provide you with a DUE DILIGENCE PERIOD in which to have recommended inspections performed on the property. It ‘buys you time’ to check out the property and again, you can walk away for any reason or no reason at all during that negotiated Due Diligence period. It also provides the seller with something secure if you walk away from the property. Keeping in mind the home is marked ‘Contingent’ which means that most buyers will not be interested in the property if they know it is currently under contract.
During the Due Diligence period you will likely have inspections performed. You can ask the seller to make repairs of provide credit for repairs during this time period. However, be advised that the home is being sold in ‘AS IN CONDITION’ unless otherwise noted on the contract and the seller is not under obligation to make any repairs. However, should you choose to walk away from the property (losing your due diligence money) the property may have a stigma attached to it as other buyers may wonder what was wrong with the home for you to walk away- so often sellers will be open to repairing reasonable, more serious requests (HVAC, water issues, etc.). Your realtor® will give you guidance on what to ask for from the seller.
Earnest Money- That is money that is within 5 days of the acceptance (effective date) of the contract. There is also a space for Additional Earnest Money. That can be in addition to the original earnest money OR it can be the date all Earnest Money is due (basically a delay in paying the earnest money) and ADDITIONAL Earnest Money is due by 5PM of the due diligence period deadline. Earnest Money is refundable to you if you terminate the contract prior to the due diligence deadline. There are other conditions in which it could be refundable past that deadline, but can be given to the sellers if the buyer walks away after the due diligence period.
Escrow Agent: That is the firm holding the Earnest Money in an Escrow account. Normally will be the closing attorney’s office, however, it can also sometimes be a real estate firm.
Settlement Date: That is the date in which all parties agree to be at the closing table. Also known as the CLOSING date. However, the true Closing date is when the property is recorded with the county. For example if your settlement date is Friday at 4 PM and the register of deeds office is not able to record it that day, then you will not actually ‘CLOSE’ until Monday. You are not allowed to take possession of the property until it records without written agreement from all parties. That is highly discouraged, so you want to plan your settlement date carefully.
Special Assessment: If the property is located in a PUD (Planned Unit Development or Subdivision) it is likely subject to an HOA with dues associated with the community. If there are not enough funds in the HOA to make needed improvements in the subdivision there may be a call for a special assessment for homeowners. If it has already been approved, the seller would pay the assessment at closing (unless otherwise negotiated). Read anything related to special assessments carefully. If it is a ‘proposed assessment’ that means it has not been approved and the seller is not obligated to repair, but the buyer does need to have the information necessary regarding the proposal to ensure they understand any potential obligations they may have in the future.
Fixtures: These are the items listed in the offer to purchase that are to be included in the purchase of the property. These would include ceiling fans, lighting fixtures, floor coverings and blinds. These do not include curtains (you would have to ask for those in your offer). They would include stove, dishwasher, oven, built in microwaves but they do not include refrigerators, washers or dryers (you would have to ask for that in your offer). The seller will indicate if they plan to leave items not listed as fixtures (refrigerator, curtains, etc.).
Home Warranty: In older homes with older units (HVAC, water heater, etc.) and in a more balanced market, a seller may consider offering a one year warranty with the home. You can also ask for the seller to provide this for you.
Financing: The offer will also require you to share how you are planning to finance the property. If you are using a program such as FHA or VA, you will have an additional addendum to attach with the offer.
Contingency: If you have a home to sell and purchasing the property is contingent upon that home successfully closing, you will note that. Obviously, not having a contingency can make your offer more appealing to a seller, however in a balanced market oftentimes they will consider contingent offers, especially if you are currently under contract or your home is in a ‘hot’ area that traditionally sells quickly. Your Realtor® can advice you.
Buyer Obligations: Financially the buyer has many obligations including paying for any inspections, appraisals and surveys (if desired), the closing attorney performing the title search, purchasing title insurance, etc. Speak with both your lender and Realtor® regarding costs associated with purchasing a property.
Seller Obligations: They must provide clear title for the property. They provide disclosures regarding the property for buyer review, HOA documents as required and evidence of payoff at settlement. They must pay any contractors who have performed work on the property prior to settlement as well as for any items purchased for the property on a installment basis unless buyer agrees to assume such as new appliances, solar panels and generators.
The seller must also allow reasonable access to the property during the due diligence period (and after as needed) for inspections, re-inspections after any agreed repairs made and final walk-through.
Keep in mind that a contract is a binding, legal document that is not assignable to another party without all parties agreement. The contract is also an obligation of all buyers. If one buyer were to pass away, the other buyer would still be responsible for completing the transaction. Please discuss how Breech of Contract by either is handled with your Realtor®
If you have any questions about anything form this article, please feel free to reach out to me. I’d love to be your real estate resource!
Every industry has their terminology that can be confusing to someone outside of their business.
Real Estate is no exception. Be prepared in advance by having a clear understanding of what you can expect to see when you make an offer.
There are some basic elements to the contract and there are terms you will want to know.
Price: That is the price you are offering for the property under consideration. While there may be other terms affecting the offer, every seller wants to know the price offered first.
Closing Costs: Are you asking the seller to provide you with some closing cost credit. Depending on the current market, you may be able to negotiate some closing costs from the seller. Effectively, this is an amount that is deducted from the seller’s proceeds. Also, your lender may tell you there is a maximum that you request, so check with your lender first.
Down Payment: In North Carolina, there are 2 places on the contract to be aware of regarding ‘down payment’ in a resale transaction. They are both a negotiable amount,
Due Diligence- That is money you are paying directly to the seller upon acceptance of the offer when it becomes a valid contract. That is due and payable immediately upon contract acceptance. Due Diligence amount vary considerably depending on the current market conditions, the neighborhood or town, as well as the competition for the property. The key things to understand about Due Diligence money is that it is deposited by the seller into the seller’s account and is NON-REFUNDABLE if you should change your mind during the Due Diligence period for any reason or no reason at all but DOES CREDIT toward the purchase price if you complete the transaction. The purpose of the Due Diligence amount is to provide you with a DUE DILIGENCE PERIOD in which to have recommended inspections performed on the property. It ‘buys you time’ to check out the property and again, you can walk away for any reason or no reason at all during that negotiated Due Diligence period. It also provides the seller with something secure if you walk away from the property. Keeping in mind the home is marked ‘Contingent’ which means that most buyers will not be interested in the property if they know it is currently under contract.
During the Due Diligence period you will likely have inspections performed. You can ask the seller to make repairs of provide credit for repairs during this time period. However, be advised that the home is being sold in ‘AS IN CONDITION’ unless otherwise noted on the contract and the seller is not under obligation to make any repairs. However, should you choose to walk away from the property (losing your due diligence money) the property may have a stigma attached to it as other buyers may wonder what was wrong with the home for you to walk away- so often sellers will be open to repairing reasonable, more serious requests (HVAC, water issues, etc.). Your realtor® will give you guidance on what to ask for from the seller.
Earnest Money- That is money that is within 5 days of the acceptance (effective date) of the contract. There is also a space for Additional Earnest Money. That can be in addition to the original earnest money OR it can be the date all Earnest Money is due (basically a delay in paying the earnest money) and ADDITIONAL Earnest Money is due by 5PM of the due diligence period deadline. Earnest Money is refundable to you if you terminate the contract prior to the due diligence deadline. There are other conditions in which it could be refundable past that deadline, but can be given to the sellers if the buyer walks away after the due diligence period.
Escrow Agent: That is the firm holding the Earnest Money in an Escrow account. Normally will be the closing attorney’s office, however, it can also sometimes be a real estate firm.
Settlement Date: That is the date in which all parties agree to be at the closing table. Also known as the CLOSING date. However, the true Closing date is when the property is recorded with the county. For example if your settlement date is Friday at 4 PM and the register of deeds office is not able to record it that day, then you will not actually ‘CLOSE’ until Monday. You are not allowed to take possession of the property until it records without written agreement from all parties. That is highly discouraged, so you want to plan your settlement date carefully.
Special Assessment: If the property is located in a PUD (Planned Unit Development or Subdivision) it is likely subject to an HOA with dues associated with the community. If there are not enough funds in the HOA to make needed improvements in the subdivision there may be a call for a special assessment for homeowners. If it has already been approved, the seller would pay the assessment at closing (unless otherwise negotiated). Read anything related to special assessments carefully. If it is a ‘proposed assessment’ that means it has not been approved and the seller is not obligated to repair, but the buyer does need to have the information necessary regarding the proposal to ensure they understand any potential obligations they may have in the future.
Fixtures: These are the items listed in the offer to purchase that are to be included in the purchase of the property. These would include ceiling fans, lighting fixtures, floor coverings and blinds. These do not include curtains (you would have to ask for those in your offer). They would include stove, dishwasher, oven, built in microwaves but they do not include refrigerators, washers or dryers (you would have to ask for that in your offer). The seller will indicate if they plan to leave items not listed as fixtures (refrigerator, curtains, etc.).
Home Warranty: In older homes with older units (HVAC, water heater, etc.) and in a more balanced market, a seller may consider offering a one year warranty with the home. You can also ask for the seller to provide this for you.
Financing: The offer will also require you to share how you are planning to finance the property. If you are using a program such as FHA or VA, you will have an additional addendum to attach with the offer.
Contingency: If you have a home to sell and purchasing the property is contingent upon that home successfully closing, you will note that. Obviously, not having a contingency can make your offer more appealing to a seller, however in a balanced market oftentimes they will consider contingent offers, especially if you are currently under contract or your home is in a ‘hot’ area that traditionally sells quickly. Your Realtor® can advice you.
Buyer Obligations: Financially the buyer has many obligations including paying for any inspections, appraisals and surveys (if desired), the closing attorney performing the title search, purchasing title insurance, etc. Speak with both your lender and Realtor® regarding costs associated with purchasing a property.
Seller Obligations: They must provide clear title for the property. They provide disclosures regarding the property for buyer review, HOA documents as required and evidence of payoff at settlement. They must pay any contractors who have performed work on the property prior to settlement as well as for any items purchased for the property on a installment basis unless buyer agrees to assume such as new appliances, solar panels and generators.
The seller must also allow reasonable access to the property during the due diligence period (and after as needed) for inspections, re-inspections after any agreed repairs made and final walk-through.
Keep in mind that a contract is a binding, legal document that is not assignable to another party without all parties agreement. The contract is also an obligation of all buyers. If one buyer were to pass away, the other buyer would still be responsible for completing the transaction. Please discuss how Breech of Contract by either is handled with your Realtor®
If you have any questions about anything form this article, please feel free to reach out to me. I’d love to be your real estate resource!