Your Alaska Real Estate Buying Guide
- In the state of Alaska, real estate transactions are typically closed by an attorney with the support of title companies.
- The buyer’s funds are held by a third-party until the buyer and seller have performed their duties.
- Documents are signed and the escrow company disburses all funds to the appropriate parties.
- Alaska uses “recordation” which is the filing of the deed as the very last step in the process.
Phase 1: Negotiations for the Alaska Purchase
Once you have an offer accepted, these are the steps you’ll need to complete…
- The offer will be accepted by the seller and a contract will be signed by both parties.
- A deposit, called “earnest money,” is paid to the seller’s real estate broker or an escrow agent. It can also be paid to an attorney. This money acts as a deposit to have the seller stop listing the home.
- You will review any disclosures from the seller. Disclosures are known issues with the property, such as needed repairs or damage. In Alaska, a specific document is usually used for disclosures.
- You’ll have time to perform inspections, which must be completed by a certain date described in the contract. If any flaws are discovered during the inspections, you may request repairs or changes to the contract or purchase price.
- A well test and septic test may also be needed for Alaska purchases.
- If you find any issues during inspections, you can request changes to the contract or purchase price. The seller can accept your request or offer a negotiated solution. If an agreement can’t be reached the contract is closed and you will have the earnest money returned.
- If the home was built before 1978, a lead-paint inspection is usually recommended.
- The buyer can negotiate a home warranty, which covers the cost of appliance repair or replacement for a given period, usually about a year.
Phase 2: Securing the Mortgage
Although you have already been approved or qualified for a mortgage, you’ll still need to go through the extensive process of having your information officially verified so you can have final mortgage approval.
- The first step is to submit your formal application for a mortgage. This can be done on your own, although many prefer the help of an experienced professional.
- The lender will review your application and issue a “good faith estimate,” which is a list of the estimated closing costs. Lenders try to make this as accurate as possible.
- The lender will request a title commitment from a title company. The company will then perform a title search to make sure there are no issues with the property. If everything checks out, a title commitment will be prepared. Title insurance may be ordered at this point as well.
- You lender will now request a series of documents for your Alaska purchase. Requested documents may include:
- Bank account information for all accounts you own.
- Information on outstanding loans, lines of credit, and other financial obligations.
- Up to two years of tax-return information. These are released to the lender through specific IRS forms.
- All information that is critical to your finances. This may include child support, alimony, legal judgements, and bankruptcies.
- Explanation of credit inquiries.
- Information on large deposits. If lenders see a large deposit that is outside of your normal income, they will want to know the nature of this payment, especially if it will be used to fund a downpayment or other mortgage costs. If the payment is a gift, the lender may request a gift letter.
- Repeated or up-to-date information on any of the above documents. Essentially, a lender wants as much information as possible, so don’t be surprised if they request more documents.
5. If you are pre-approved, you’ll have to provide a document to the seller. Eventually you will have to get a loan commitment letter from the lender. It’s common in Alaska that if you fail to reveal to the lender something substantial to your finances, and this results in loan rejection, you are in default of the contract. This means you will lose your earnest money and the seller can sell to another buyer without penalty.
6. If you are approved, an appraisal is ordered for the Alaska property. This is essentially the final step in getting the loan approved. Lenders want to know that the property they are lending against holds significant value. Most contracts in Alaska do not have an appraisal clause by default, but the deals often include a condition that the property be appraised at or above the purchase price. If the appraisal is low, changes to the purchase may be required.
7. Homeowners’ insurance is now ordered.
8. You may also need additional hazard insurance to protect from storms or fires.
Remember that the mortgage process is long and meticulous. It’s best to start as early as possible to make sure you have everything in proper order.
Phase 3: Closing the Purchase
Now it’s time to close the deal! In Alaska, the process can span a couple of days and even a week, which is different from other states, where the closing is completed in a matter of hours.
Unlike other states, the process is usually not completed with both parties at the same table together.
- The lender will send your final documents to the escrow agent and the final closing will be scheduled.
- A final walkthrough is performed. This is to verify that the property is in the same condition as it was when the process began.
- The closing will convene at the office of an escrow agent or closing agent.
- The buyer now pays the remaining funds for their downpayment and closing costs to either the escrow agent or a representative from a title company. This can be done early to speed the process.
- The deed is recorded with the appropriate city or county.
- The deal is now recorded and you can receive the keys to your wonderful new home!
Loan Limits in the State of Alaska
Unlike most states, which have different limits for different counties, the entire state of Alaska has the largest loan limits found in the country. To encourage home purchases in Alaska, the FHFA has set the conforming loan limit for a single-family home in Alaska at $970,800. This is far greater than the base limit of $647,200.
From the North Slope Borough to the Aleutian Islands, you can borrow up to $970,800 and still enjoy the benefits of a conforming loan.
You can also use conforming loans to purchase a property with up to four units. If you want to purchase a two-unit property, the limit is $1,243,050, while the limit for a three-unit is $1,502,475. For a four-unit property, you can borrow up to $1,867,275 and still use a conforming loan.
If you need a loan larger than these amounts, you can use an Alaska jumbo loan.
Downpayment Assistance in Alaska
Homebuyers in the state of Alaska can find a wide variety of support from different state and local organizations.
Statewide DPA Options in Alaska
Although Alaska downpayment support may not be as large as other states, there are a few organizations that help homebuyers who can’t save for a downpayment…
AHFC’s “Closing Cost Assistance”
The Alaska Housing Finance Corporation (AHFC) provides a couple of options for downpayment help. The most prominent is their Closing Cost Assistance program, which provides as much as 4% of the loan amount. Although it’s called “closing cost assistance,” the funds can be used towards a downpayment. According to our research, this support is often a grant that does not need to be repaid.
AHFC’s Affordable Housing Enhanced Loan Program (AHELP)
Another option is the AHELP program, which is also administered by the AHFC. Through this program, buyers can receive grants, deferred-payment loans, or forgivable loans.
Neighborhood Works Alaska
This organization is a national non-profit that provides housing support through a variety of efforts. Their Alaska chapter provides downpayment assistance as an affordable loan that helps buyers avoid high-cost mortgage insurance.
Major Local Programs in the State of Alaska
Many of the downpayment assistance programs come from local organizations that serve specific cities or regions. Here are a few examples…
Fairbanks Neighborhood Housing Services
This community organization offers the HOME Opportunity Program, or “HOP.” This is a downpayment-support program that assists low-income buyers. Eligible buyers can secure up to $30,000 in support, and up to $10,000 of this support can be forgiven.
Cook Inlet Downpayment Assistance
Homebuyers in the southern-central Alaskan region around the “Cook Inlet,” which includes Anchorage, can get assistance up to 20% of the purchase price, maxing out at a total of $60,000. This is a second mortgage that needs to be repaid but comes with generous terms.
Tlingit Haida Regional Housing Authority DPA
The THRHA provides downpayment assistance as high as $20,000. This assistance is a 10-year loan with a deferred payment.
Common Requirements for Alaska Downpayment Assistance
For most programs, there is an income restriction. Downpayment assistance is reserved for low- and moderate-income buyers, so you’ll need to meet income requirements to be eligible.
Many programs also require that the home being purchased is a single-family property that will be lived in for a certain period. There may also be purchase-price restrictions; for example, the program may state that if you use their assistance, you can’t purchase a property over $225,000.
Programs are constantly changing their details, requirements, and assistance totals. For accurate and up-to-date information, you must contact a qualified lending professional.
For more information on Alaska downpayment assistance, contact our helpful staff today!
