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Your Guide to Buying a Home in North Carolina

Buying a Home in North Carolina: Your Step-By-Step Guide

  • In North Carolina, an attorney is required to complete all real estate transactions.
  • The buyers and the property sellers usually need to be together at the same table to complete the purchase.
  • One unique aspect of North Carolina is that there is usually no inspection and loan contingency. Instead there is a “due diligence” period where a buyer can walk away from a contract for a variety of reasons.
  • North Carolina has its own unique requirements for inspections, which can vary by coastal and inland areas.
  • There may also be unique insurance requirements, including hurricane insurance.

Phase 1: Negotiations for Purchasing a North Carolina Home

To start the purchase in North Carolina, you will need to shop for homes, find one you like, and begin negotiations to purchase. You will also need to get pre-approved for a mortgage.

  1. After getting pre-approved for a mortgage, you can being shopping for homes.
  2. Once you find a home you want to purchase, you will need to make an offer. 
  3. The seller will accept the offer and a contract will be signed.
  4. A deposit, known as earnest money, is paid to an attorney handling the escrow. 
  5. In North Carolina, a due-diligence fee will be paid directly to the seller.
  6. The signed contract is sent to an attorney to begin preparation of documents.
  7. The seller will need to provide disclosures on the property. These disclosures outline issues with the home, as well as past repairs. 
  8. The buyer can review these disclosures and accept them or, if they prefer, negotiate a different price or repairs to the property. 
  9. The due diligence period will now begin. This is a unique part of the North Carolina purchase process, giving the buyer a set amount of time to conduct inspections and appraisals, as well as secure financing. If the buyer can’t complete these steps, they will likely lose all of their deposit. 
  10. As the buyer, you can choose to complete inspections, including a general home inspection, mold, or termite inspection. 
  11. A lead inspection may also be needed, especially if the home is older. 
  12. Before the due diligence period ends, the buyer can walk away from the contract if anything is uncovered during inspections. In most cases, they will negotiate a solution, such as a reduced price or having the problem fixed before purchasing the home.

Phase 2: The Mortgage Process in North Carolina

Some people are fortunate enough to purchase their home with cash. The vast majority of buyers, however, will need a mortgage loan. This is true for the United States as a whole, as well as the state of North Carolina. 

For North Carolina buyers, it’s best to start the process early, as there are many steps involved and you may need to provide dozens of documents to your lender. 

The process usually looks like this: 

  1. To start the process, you will need to complete a mortgage application. This can be done on your own or through a mortgage professional. 
  2. The lender will send a “good faith estimate” that outlines the estimated costs for finalizing the loan. 
  3. To complete the approval process, you will need to send numerous documents to the lender. These can include: 
  • Bank Statements: These can be used to verify your savings and, in many cases, will form the foundation of your loan approval.
  • Tax Returns: You may need to bring at least two years worth of tax returns.
  • Pay Stubs: While not perfect, pay stubs show lenders how much you earn on a weekly or monthly basis.
  • Debt Information: If you have other debts, you’ll need to provide information to the lender. This will help them calculate your debt-to-income ratio. 
  • Financial Disclosures: Anything that impacts your income, both positively and negatively, should be included. This could include divorce settlements, alimony, child support, legal judgements, property liens, and ongoing lawsuits of any kind. 
  • Information on Large Deposits: If there are any large deposits that are outside of your regular income, these will need to be disclosed to the lender. Most importantly, if you receive a gift, your lender will need information on that gift, including a statement that it is not a loan. 
  • Repeat Documentation: Lenders want as much information as possible, so don’t be surprised or offended if they ask for repeat information on your income debt load, job situation, or any other financial factors. 

4. Eventually, the lender will deliver an approval decision and issue a loan commitment letter. 

5. Assuming you are approved, an appraisal will be requested. As long as the appraisal is high enough, the transaction can continue. However, if the appraisal comes in low, changes may be needed, such as a higher downpayment. 

6. For North Carolina loans, there is no specific loan contingency. While contracts in other states will need to remove certain contingencies, this does not need to occur, as the contingencies do not exist. However, there is a due diligence period that serves a similar function. Essentially, the buyer needs to pursue a loan with “due diligence” or they could lose their deposit. 

7. Homeowners’ insurance will need to be ordered. In North Carolina, the insurance may depend on your area. For example, if you are in the coastal region, you may need hurricane or tropical storm insurance. 

The process for securing and finalizing a loan can be time consuming. To make the process faster and easier, you’ll want to start as early as possible. 

Phase 3: Closing the North Carolina Purchase

Residential real estate closings will need to be handled by an eligible attorney in the state of North Carolina. However, a non-attorney can direct parties on signing documents, and can ensure that both the buyer and seller have properly completed documents. A non-attorney can also receive and disburse the closing funds. 

In North Carolina, the process is completed at one table where both the buyer and seller will complete all the required documents. 

The process usually looks like this: 

  1. First, the attorney will perform a title search to make sure there are no liens against the property. Assuming the title is “clear,” the process can continue as planned. 
  2. The paperwork for changing the title will be prepared at this time. 
  3. The final amount that the buyer needs to bring for closing will also be prepared. This may need to be a cashier’s check. This amount will include downpayments, property taxes, utilities, and more. 
  4. Before the final signing (sometimes right before), the buyer has a chance to complete a walk-through of the property. This is to ensure that the property is still in good condition and there has been no new damage.
  5. The buyer and seller will then meet at the closing table and complete all the required documents. 
  6. The buyer must now pay the remaining funds to complete the transaction. 
  7. The attorney will record the transaction and deed with the appropriate government. This may be the city or county where the property is located. 
  8. The buyer now gets their keys and can move into their new North Carolina home!

Conforming Loan Limits in North Carolina

Loan limits for conforming loans are set by the Federal Housing Finance Agency (FHFA). Using home-price data, they set a limit for single-family homes on a county-by-county basis. Most counties across the nation are under the “base limit,” but in high-cost areas, this limit can be increased.

Almost all of North Carolina falls under the base limit. From Cherokee County at the far western edge of the state to Brunswick county at the southern edge of North Carolina’s Atlantic coast, the vast majority is under the base limits, which is currently $548,250 for a single-family home. In these areas, the limit for a two-unit property is $702,000, while the limit for three-unit properties is $848,500. For a four-unit property (the maximum number), the limit is $1,054,500.

There are three counties in North Carolina where the conforming loan limits are higher. At the northeastern edge of the state, three counties on the Albemarle Sound have higher limits than the rest of the state. In Perquimans, Pasquotank, and Camden counties, the limit for a single-family home is $625,500. A two-unit property has a limit of $800,775, while a three-unit property is capped at $967,950. In these three counties, the limit for a four-unit property is $1,202,925.

These are the limits for conforming loans only. If you need higher amounts, there are options available, such as jumbo loans in North Carolina. 

 

Downpayment Assistance Programs in North Carolina

Saving for a downpayment is one of the largest challenges for many buyers. If you have struggled to create a downpayment, you may be eligible for downpayment assistance (DPA) programs, which are offered by groups including state governments, city councils, and non-profit organizations.

Statewide North Carolina DPA Programs

NC Home Advantage Mortgage
One of the most important programs in the state is the NC Home Advantage Mortgage, which provides downpayment assistance that can go as high as 3% of the primary mortgage. There is also an option that can bring up to $8,000 in support. Known as the NC 1st Home Advantage Down Payment, this program is available to first-time buyers and military veterans. Repayment for this DPA program is only required if you sell, refinance, or transfer the home to another owner within 15 years. Also, between years 11 and 15, 20% of the loan is forgiven, resulting in complete forgiveness of the loan!

Major Local DPA Programs in North Carolina

Concord Downpayment Assistance Program
This is a forgivable loan available to low-and moderate-income buyers purchasing a home in the city of Concord, NC. Support comes as a five-year depreciating loan. After five years, the loan can be eliminated.

HouseCharlotte Program
Buyers using a specific loan program may be eligible for support through the City of Charlotte. This option can provide funding as high as $10,000 for eligible buyers. Buyers with incomes below 80% of the area’s median may be eligible for up to $30,000 in support.

Raleigh Homebuyer Assistance
The Homebuyer Assistance program, which is available to Raleigh residents, is a zero-interest loan that can be used for a downpayment or closing costs. The loans are deferred, so you won’t have to pay them off right away. Assistance can go as high as $20,000, and purchases of up to $309,000 are eligible.

Common Requirements for Downpayment Support

These programs can help you overcome the significant downpayment barrier. But there are restrictions and requirements. Many programs have requirements for credit scores (usually around 640 or higher) and some require that you contribute a small sum of your own cash; around $500 or $1,000 is typical.

Almost all programs  have some type of limit for income. That is, they have a maximum income for eligible borrowers; if you make more than the limit, support is unavailable. This is understandable, as the programs are intended for low- and moderate-income buyers.

Some also place a limit on purchase price, although the limits are high enough to purchase a comfortable, safe house. Many will also require that you live in the home for a certain period in order to have the downpayment loan forgiven.

These programs are constantly changing. For up-to-date information on downpayment options in your North Carolina city or county, contact our team right away!