North Dakota Buying Guide
- In North Dakota, real estate transactions are often closed by a title company. However, an attorney may be involved in the process.
- A “closing agent,” who is either an attorney, representative from the escrow company, or an escrow agent, is used to complete the transaction.
- The buyer and the seller will usually complete the transaction together at the same table.
- There are unique environmental features in North Dakota that may effect the sale. This may include the need for flood insurance.
Phase 1: Negotiations
- To launch the process, you will need to make an offer on a home and have that offer accepted.
- The buyer will pay their “earnest money,” which is cash, held in escrow, that demonstrated their real intention to make the purchase.
- The seller, if needed, will provide disclosures. These is simply a document that lists all potential problems with the home, as well as past repairs and environmental concerns.
- Next, inspections will be completed. While this is optional for the seller (and sometimes skipped to speed the process), most professionals highly recommend making a purchase with inspections. General inspections, as well as pets inspections, may be recommended for North Dakota homes.
- If the home uses a well, the well water will need to be tested and verified.
- When testing and inspections are complete, the buyer has a period of time to request repairs, renovations, upgrades, and home improvements. The seller can agree to all changes or deny the buyer’s request. Most common, however, they will negotiate a counter offer. The buyer can reply in turn, and negotiations continue until an agreement is reached.
Phase 2: Securing the Mortgage Loan in North Dakota
Once you come to an agreement on your North Dakota purchase, you’ll need to start the loan process. This step is relatively easy, but it can take a while, especially if the lender requires additional documentation. You can begin this process at the same time as Phase 1, and it’s best to start as early as possible.
- First, you will submit an application for your loan. This can be done with the help of a mortgage professional or you can do it on your own.
- The lender will send a “Good Faith Estimate,” which is an estimate of the total costs to close the loan. This number may not be exact, but lenders do their best to make it as close as possible.
- Now the lender is ready to review your documents. This a phase that may require some work on your part. You will likely need to provide:
- Bank statements for all accounts that you own.
- Information on outstanding loans and debts, including car loans, other mortgages, credit cards, and consumer debt.
- Two years of tax returns. (This number may vary; you could be asked to provide more.)
- Pay stubs and other financial data related to your income.
- Financial information that impacts your monthly budget, including payments you make or receive. This may include child support, alimony, legal judgements, and liens on property.
- Information on cash gifts. If you have received a cash gift from a loved one for a downpayment, you may need to supply information on this gift. The lender may request a gift letter, which is a statement that the gifted money is not a loan and will not need to be repaid.
- Repeat or duplicate information on any of the above. Lenders want as much information as possible, and the more you can provide the better your chances of securing the loan. Don’t be offended or surprised if they ask for updated bank statements or income documents at any time. If there is any change in the documents (such as a change in income), the loan may be reassessed.
4. Eventually, the lender will deliver a decision on your loan. If you are approved, you will be given a loan commitment letter that states their willingness to support your North Dakota real estate purchase. The loan commitment may come with conditions, including an appraisal requirement.
5. Once approved, financing contingency can now be removed. This is simply a deadline that the buyer needs to meet for financing. If you are unable to secure or finalize financing by this date, you can request an extension. However, you’ll need to have started the application process long before this due date.
6. Most loans will require an appraisal. The appraisal is usually ordered by the lender or mortgage agent, and while they can deny a specific appraiser, they cannot request an appraiser of their choosing.
7. Some appraisals will come in low. If this happens, changes will likely be made to the loan terms and the loan could be denied entirely.
8. Homeowners insurance will be ordered and the purchase process can move to final closing.
Phase 3: Closing the Deal
In the state of North Dakota, the transaction will be completed at one table with both the buyer and seller present. Once all the documents are signed, the buyer can take possession of their new property!
- A title search will need to be completed. This verifies that the home is free and clear and can be legally sold by the seller. This needs to be done early so the title can be cleared if any complications in ownership are discovered.
- The required paperwork will then be prepared by the attorney or closing agent.
- A closing date is scheduled.
- The final cash figure is calculated. This is the number the buyer will need to bring, usually in the form of a cashier’s check, in order to close the deal. It will include downpayment, closing costs, fees, and more.
- Before the sale is finalized, one last walk through is completed. This is just a chance for the buyer to make sure there has been no damage to the property.
- Everyone, including the buyer, seller, and agents, will now meet for the final closing.
- The buyer will pay the remaining costs and fees to complete the transaction.
- The purchase and new ownership is recorded with the city where the property sits. If outside of city limits, it may be recorded with the county.
- The buyer now has a new North Dakota property!
Conforming Loan Limits in the State of North Dakota
The limits for conforming loans are set by the Federal Housing Finance Agency, which determined the maximum amount on a county-by-county basis. Most counties in the United States are under the “base limit,” but counties with higher home prices may have large limits to allow for reasonable home purchases.
In North Dakota, the entire state is under the base limit for the nation. From Pembina County in the northeast corner to Richland County in the southeast; from Bowman county in the southeast to Divide County, which borders Montana and Canada, the limit for a single family home in North Dakota is $548,250.
It’s also possible to use a conforming loan to purchase a multi-unit property with up to four units. For a duplex, the conforming limit is $702,000, while three-unit properties have a limit of $848,500. If you are buying a four-unit home, the limit is $1,054,500.
Remember that these are the limits for conforming loans only. There are other options, such as jumbo loans in North Dakota.
Downpayment Assistance Programs in North Dakota
North Dakota is a wonderful place to live and work, but many residents struggle to save for a downpayment. This problem, which is faced by aspiring buyers all across the country, is often addressed by state and local governments, as well as charitable and non-profit organizations.
If you live in North Dakota, you may be eligible for financial support that could help you generate a downpayment and finally purchase a safe, comfortable property.
Statewide Downpayment Programs in North Dakota
While organizations provide support, the largest and most important group is the North Dakota Housing Finance Agency (NDHFA). This agency, which is part of the state government, has two important programs. The two programs, however, act in a very similar manner even though minor details are different.
The agency offers the DCA program as well as the Start program. Both options provide borrowers with additional financing to cover a downpayment or closing costs. The supporting loans can be as high as 3% of the first mortgage.
Each one has different requirements and qualification standards, but each one is available from the Red River to the Montana border.
Major Local Programs for Downpayment Assistance
While the NDHFA offers support from one end of the state to the other, there are local programs that also help with a mortgage downpayment.
Here is one example of a downpayment program available to buyers in a specific area…
City of Minot Resilient Homebuyer Program
The city of Minot, in northwest North Dakota, was damaged in 2011 by major flooding. Although the flood is now more than a decade in the past, there is still downpayment assistance for people who want to sell their properties in a flood protection area. Minot residents whose homes were damaged are eligible for $60,000 in purchase assistance.
This is just one example of a locally-available downpayment program in North Dakota. Other options are available, so talk with a mortgage expert for options in your area.
Common Requirements for North Carolina Downpayment Assistance
Each program is different, but if you are seeking downpayment support you’ll need to meet a variety of requirements and conditions.
Since the downpayment support from the NDHFA is the largest, we’ll use it as an example. For the DCA and Start programs, you’ll need to meet specific income limits, which are based on the county. In most counties, the limit for a three-person family is $67,050. Other counties may have higher limits.
Many programs are only available to first-time buyers, and many will require you to complete homebuyer education. There are also qualifications for credit scores, limits on total price, and requirements for a personal contribution to the purchase.
Downpayment assistance in North Dakota is constantly changing. For current information on DPA programs in your area, contact our team today!
