Welcome to the Ultimate Guide to Buying a House in the Triangle
Are you dreaming of living in the South? Raleigh, North Carolina has both the charm of a Southern city and sophistication of a Metropolis with more than two million people calling the Raleigh area home. As the capital of North Carolina, Raleigh is nationally ranked as one of the best places to live and work. This vibrant, fast-paced city is a cultural, economic, and technology powerhouse in the South with companies such as Microsoft, Apple, and Red Hat represented. The announcement of both Google's and Meta's plans to open offices in the Raleigh area will give an additional boost to the fast-growing economy of the region. The capital city also boasts a global real estate presence with buyers from nearly every continent staking claim to a piece of our booming real estate market.
Buying a home in the Raleigh market comes with a variety of benefits from having access to many job and educational opportunities to reaping the social and cultural rewards that a conurbation has to offer. This guide to buying a home in Raleigh offers you tips and techniques that cover everything from budgeting, homebuyer education classes, the search process, to inspection and closing day. Purchasing a home anywhere is a huge venture. However, choosing the City of Oaks or surrounding Triangle area as your destination is an investment into your social and economic future.
Here are the Steps to Owning Your Own Home:
The Down Payment & Closing Costs
The first and most important step in buying a home is to save for a downpayment. A downpayment is the amount of money you are required to pay upfront when purchasing a house. The size of your downpayment will depend on the type of loan you choose, however it’s typically between 3-20% of the purchase price. Some first-time homebuyers may be eligible to receive downpayment assistance in the form of grants from local and state organizations and depending on where the home is located. Making a larger downpayment can have several financial benefits such as a lower monthly payment and avoiding private mortgage insurance (PMI). Private mortgage insurance is the amount of money that the lender requires in the event a homeowner stops making their mortgage payments. PMI is a type of insurance that protects the lender's interest, typically amounts up to 1.5% of your loan amount each year and included in your monthly payment. In addition to your downpayment, you will also need to save for closing costs. Closing costs are fees associated with the home buying process and are necessary to close on the purchase. These fees usually consist of title fees, appraisal fees, home inspection costs and other miscellaneous expenses. It’s important to be sure to make closing costs part of your budgeting so you can pay them when the time comes.
It is important to know exactly how much house you can afford before beginning your home search. Having this information will help you avoid losing time looking for homes out of your price range and budget. Homebuyers have several choices when it comes to choosing a lender. Online lenders such as Rocket Mortgage and Lending Tree are very popular and a homebuyer can shop for a mortgage loan from the privacy of their home. Alternatively, your real estate agent should be able to refer you to one of their experienced and preferred lenders.
The lender’s role is to evaluate your creditworthiness which includes a hard pull of your credit report and provide you with a “pre-qual” letter. The pre-qualification is a preliminary approval and means that your loan is pending. Things that the lender will look for are your credit scores from Equifax, TransUnion and Experian, types and amounts of credit accounts as well as payment histories and credit limits. The loan process includes analysis of a homebuyer’s paystubs, W-2 statements and completed tax returns (all from the previous 2 years). Once the lender has compiled and analyzed all of your financial information, a formal credit decision can be made. At this point, the lender will be able to pinpoint your interest rate, loan amount, and repayment terms. Under most scenarios, the lender will require that the homebuyer have a two-year work and residence history. A homebuyer’s DTI or debt-to-income ratio is vitally important. Most conventional lenders require a DTI ratio of no more than 45% to qualify for a mortgage loan. However, this requirement could be higher with nonconventional lenders that approve mortgage applications with DTI's upwards of 50% and higher.
It is important to mention that your real estate agent has no influence on lender credit decisions. Also, a real estate agent never needs to know your salary or income or credit score. These are discussions best held between you and your loan officer. It should be noted the differences between a pre-qualification and an approval. As previously mentioned, a pre-qualification is generally not a guarantee but shows a seller that you can afford to purchase their home. A loan approval however is a more in-depth investigation into your financial history and can take up to 30 days to complete.
Choose a Real Estate Agent
The first person you will want to contact when buying a home is a real estate agent. Some homebuyers make the mistake of representing themselves or get into a dual agency situation when buying a home, often running into trouble. Dual agency is when one real estate agent (usually the seller's agent) represents both the seller and the buyer. The homebuying process involves negotiations and with the right Realtor, you will most likely get a better deal on your dream home with the use of superior negotiation skills. As your professional guide and advisor through the homebuying process, a real estate agent needs to be someone you trust and feel comfortable with. Ask potential agents questions about their experience, expertise and any other qualifications that may affect your choice. Once you feel confident in their knowledge, work with your real estate agent to develop a budget and search strategy.
Understand the Market
Knowing the market will be critical to finding the right home in the Triangle. Take time to research recent trends such as average listing prices, median house values and days on market. Keeping up to date on the market will be a major asset when it comes to making a successful offer on a home. For example, knowing the best time of year for buying a home in the Triangle, what neighborhoods are growing or shrinking and understanding the difference between median listing prices and median sale prices will all be essential to bargaining with sellers. Fully understanding the market can help prevent you from overpaying for a house.
Find a Neighborhood
Location, location, location! The Triangle is a fast-growing area with a plethora of housing options in communities scattered throughout several counties including Wake, Durham, Orange, Chatham and Johnston. Raleigh is one of the most diverse cities in the nation and you will find a mix of new construction and resell properties for sale in suburban, urban and rural communities throughout the metropolitan area. From Zebulon to downtown Durham, think about what factors are important to you when considering neighborhoods such as school districts, walkability or commute time and amenities. You can also use this website to research popular neighborhoods and gain insight into what each has to offer. Every area will have its own unique characteristics as well as varying home prices which ultimately will influence your decision.
The House Hunt & Offer
Once you have your budget and area preferences set, it’s time to start looking for a house. Initially, you may wish to use the listing and property search tool on this website if you prefer looking from the comfort of your own home. However, once you narrow down properties that you like, your real estate agent can schedule viewings so you can see them in person. When viewing houses, consider factors such as size, condition, and location. Also, make sure to take notes during the viewing so you can remember each property’s features and amenities. After seeing a few houses, you should have a better idea of the type of home you want.
Some of the most important things homebuyers look for include:
Property tax amount
Once you’ve found a property that suits your needs and budget, it’s time to make an offer. Your real estate agent can help you negotiate with the seller as well as handle any paperwork that may be needed to close the deal. Something to always be open to during the negotiation process is a counteroffer, as the seller may be open to coming down on their price. Another aspect to the offer process is the earnest money deposit. While earnest money deposit isn't required in North Carolina, most sellers do require an earnest money deposit and it's typically 1-3% of the sales price. Earnest money deposit demonstrates your good faith to the seller and usually held in escrow on behalf of the seller or by the seller’s agent. Typically, your real estate agent will ask you to write a check to the seller then he or she will deliver the check to either the seller’s agent or an escrow agent. Earnest money is applied towards the purchase price at closing and non-refundable should the homebuyer chooses to terminate the contract.
The Home Inspection & Appraisal
A home inspection is an important step for any homebuyer. It’s a thorough examination of the property to look for any possible defects or safety issues that may need to be addressed. Paying for the services of a professional home inspector is well worth the cost, as it can save you from unexpected and costly repairs later on. In real estate, due diligence is the timeframe between once an offer is accepted and closing. It involves payment of an upfront fee from the buyer to the seller, and the amount can vary. Typically, the amount of due diligence depends on the competitiveness of the market as well as the number of offers the seller receives. Due diligence fees can go into the thousands of dollars in the Raleigh-Durham market and normally lasts anywhere from 2 weeks to 30 days. This allows the buyer time to obtain both an inspection and appraisal of the property. The due diligence fee is separate from the earnest money deposit and is typically non-refundable in the event the buyer decides not to go through with the purchase. So, a buyer should make their home choice very carefully as well as ensure that their financing is rock solid.
Just the same, an appraisal will be needed to determine the true value of the home. Most banks and lenders require an appraisal to make sure you are not paying more than the fair market value for a property.
Once you’ve found a property that suits your needs and budget, it’s time to make an offer. After both parties have agreed to all terms and conditions of the contract, it’s time to sign the closing documents. In North Carolina, a closing is performed by an attorney. Your real estate agent will work with the attorney’s office to schedule the closing on your behalf. The attorney’s closing fee is considered part of closing costs and a buyer could expect to pay between $600-$1000.
The closing attorney will also request a title search on the property to determine legal ownership. A title search is also necessary to uncover the existence of liens, errors or defects on the seller's title which could affect your ability to purchase the home. Many lenders require that homebuyers purchase title insurance to protect the buyer from any problem that could occur with the transfer of the property’s title from seller to buyer. A title search is conducted by a title company, typically cost between $300-$600 and part of closing costs.
During this time is when the homebuyer should shop around for homeowner’s insurance on their new home. Property insurance is required by the lender before closing on the loan and is part of closing costs. It is recommended that the homebuyer work closely with their real estate agent for suggestions on where and how to purchase property insurance, often referred to as a hazard insurance policy. This is also a good time to either transfer existing utilities or establish new services at your new home.
Get the Keys & Start Packing
Finally, the dream is becoming a reality and you are ready to move into the perfect house! After all of the paperwork and forms have been signed by both you and the seller, and the closing attorney has finished preparing all of the loan documents, as well as received closing instructions from the lender plus funds to close have been received by all parties involved, you can start packing. This is the most exciting step!
The packing process is where you can decide what is going into the new house and what can be sold, donated or thrown away. Many people find this to be a great time to declutter and get rid of any unwanted items. Once you’re all packed up and ready to go, the next step is moving into your new home. Buying a home can be an overwhelming process, but with the right guidance and research, it can also be an exciting one. Buying a new home, especially as a first-time homebuyer, is a major milestone in life and by following these steps you will be living the dream of owning a home in one of the most captivating and exciting cities in the country!