How to Buy a Home in Charlotte, North Carolina. [10 Steps]
- Justin Yingst
- Jan 15, 2024
- 7 min read
If you are a first-time home buyer or are considering buying a home in North Carolina, then you probably would like to know the steps involved. Every state has different procedures, contracts, and standards. Being informed before you start your process is critical to a successful and smooth process.
Here we are going to break down the 10 steps of buying a home in Charlotte, North Carolina.
Step #1: Financials & Budget.
Firstly, you want to determine your financials and budget. Before you start your process, determine you have adequate financials to support a down payment, closing costs, and the mortgage you will take on. Typically, you can buy a home for as little as 3.5% down payment, and will also need 2-3% to cover the closing costs. There are more creative ways to use as little as 0% down payment or have seller pay closing costs, but that's for another day. Connecting with a mortgage lender will specify the loan you are qualified for.
You will also want to determine how much money you would 'like' to spend monthly on your new home. This is a critical step to ensuring you feel comfortable with the payment you will take on. The next step would be getting confirmation from the lender that you are pre-approved for that monthly payment.
Building your credit score may also be an important step in getting your pre-approval. Use this time to focus on repaying any debt, or ensuring there are no late payments.
Step #2: The Pre-Approval
Getting your pre-approval is the next important step. A pre-approval gives you the confirmation of how much money you can get loaned to you from the banks. This involves income checks, W2 Forms, credit checks, and other documents. Once you find out you're approved for "X" amount, you now know how much your maximum home can cost.
Step #3: Talking with a Real Estate Agent
Now that you have your pre-approval, you are ready for to meet with a Real Estate Agent. Meeting with your agent, you can now learn the entire steps involved in making an offer, going under contract, and what the closing process looks like.
This time is also critical to determine what neighborhoods and communities are possible with your pre-approval. I sit down with my clients and open up the MLS portal, fill in their criteria, and see how many homes fit that criteria and how many have sold in the specific neighborhood they are looking for. Setting realistic expectations here is important for a smooth move.
Step #4: Start your house hunt
Now we know what we are looking for and where. This is where you will physically tour homes. After determining your needs and your wants, you will have a great idea of what's important in this future home. If you create a good enough criteria, you should visit no more than 6 homes before you find one you and your partner fall in love with. When that time comes, it's important to know how to write a strong offer with your Real Estate Agent.
Step #5: Making an offer
Now we know what we are looking for and where. This is where you will physically tour homes. After determining your needs and your wants, you will have a great idea of what's important in this future home. If you create a good enough criteria, you should visit no more than 6 homes before you find one you and your partner fall in love with. When that time comes, it's important to know how to write a strong offer with your Real Estate Agent.
There's a few important lines on the Offer to Purchase we will go over:
Purchase Price: The amount you are offering the seller to purchase the home.
Due Diligence: Due diligence works differently in NC. Due Diligence is used for the buyer to perform inspections on the home, and get financing/appraisal in order. If for any reason the buyer terminates the contract within the Due Diligence Period, the buyer forfeits their Due Diligence amount to the seller. The buyers are welcome to re-negotiate terms of the contract if appraisal or inspections have issues that arise. In a non-competitive market, viewing Due diligence as a rent payment for "taking the house off the market" is a good way to get an idea of what to expect. If a house rents for $3,000 a month, and you are asking for a 3 week due diligence period, expect to deposit roughly $2,250 for Due Diligence. It is important to realize, when a home is under multiple offers or in a competitive neighborhood, the Due Diligence amount expected can easily change to $5,000-$20,000. This is a strong tool to get your offer accepted in multiple offers, however be aware that if you terminate the contract, this money is forfeited.
*If the buyer purchases the home, this due diligence fee is credited towards the Cash to Close for the buyer.
Due Diligence Period: This is the amount of time you are requesting to do Buyer's Due Diligence (Inspections, Appraisal, and final financial approval). Typically this is 2-3 weeks, but can differ depending on the situation.
Earnest Money: This is the money put down to the Escrow Agent (typically Closing attorney in NC), as another deposit with the Due Diligence fee. Earnest money is typically 1% of the purchase price. If a home costs $300,000, earnest money is traditionally $3,000. If the buyer decides to terminate the contract during the Due diligence period, only the Due Diligence fee would be forfeited. If however, the contract is terminated after 5PM the last day of the Due Diligence period, then the earnest money would also be forfeited. It's important to know these dates, so if the buyer decides to terminate from the contract, it's done during the Due diligence period.
Closing Date: This is the agreed upon date for settlement. Typically 28-45 days from the offer.
Closing Attorney: The buyer typically selects their closing attorney to perform a title search, get title insurance, deed documents, and all other cash to close aspects of this transaction. The closing attorneys keep the transaction smooth and and organized.
These are the main sections in the North Carolina Offer to Purchase (2-T) form for Residential homes.
Step #6: Negotiations
Once you have submitted your Offer to Purchase to the seller, the seller has three options: Accept, Reject, or Counter your offer. The most common response is a counter-offer. The seller's agent will typically give you new terms their client would accept. If you agree to those terms, write up a new offer to purchase, and once it is signed by all parties and communicated that it has been accepted, you are now under contract.
Step #7: Home Inspection
Once you are under contract, you will need to write a check to the seller for the Due Diligence amount agreed upon, as well as a check to the Closing Attorney (Escrow Agent) for the Earnest Money. Once that is completed, you/your agent will send your Closing Attorney & Lender the executed offer to purchase and start your file.
Now you will want to schedule a home inspection as soon as possible to ensure you have adequate time for negotiations. Your Real Estate Agent should be able to provide you 3 qualified home inspectors. Typically, a Standard Home Inspection, a termite inspection, and a radon inspection, is advised. More inspections may be needed depending on the homes condition and age. The inspections will typically run anywhere from $400-800 depending on square feet, age of the property, and amount of inspections.
Step #8: Financing & Appraisal
During the under contract period, you should ensure your lender is processing the loan properly and you are approved. If for any reason you need to swap lenders, you will want to get that done as soon as possible, as the lender will need to order an appraisal. Your goal from the lender is to get a "clear to close" as soon as possible. This is expedited by submitting all relevant paperwork quickly.
The appraisal is done by a bank-appointed appraiser typically. The buyer will need to pay for the upfront. This typically costs anywhere from $500-$1,000. The appraiser will determine a value for the property being purchased. If your offer is for $395,000, you would want the appraiser to value it at $395K or above in a perfect world. However, if the appraiser determines the home to appraise at $385K, you have three options as a buyer.
Ask the seller to drop the purchase price to $385K. (this isn't always likely to happen)
Ask the seller to meet you half way. You pay $5K cash, they drop the price to $390K.
The buyer covers the entire appraisal gap of $10,000.
Even if the seller chooses not to negotiate with the buyer, it's always advised to at least ask. You may be surprised what they say.
Step #9: Title Search & Insurance
Your closing attorney will be coordinating a title search & coordinating homeowners insurance. The title search is completed to ensure the sellers are able to sell the home legally without any issues. The title search fee is typically $250-$300.
Title insurance is required if you are purchasing the home with a loan. This ensures if for whatever reason there are issues with ownership after the home closed, the lender is protected from their investment. The buyers also have an option to get Owner's Title Insurance to cover their down payment.
Step #10: Closing
A few days before closing, the buyer will receive a Settlement Statement/HUD. This is a full cost breakdown of all the items in the transaction. Review this document for accuracy. If you paid for the home inspection and appraisal up front, this cost should not be reoccurring on your Settlement Statement. If all the numbers add up, you are clear to proceed.
Typically one day before your closing date, you are clear do a final walk through and then wire transfer the required money to the closing attorney. *Be vigilant to watch out for Wire Fraud. The final walk-through is important to ensure the seller has moved out, the home is in an acceptable condition, and you're clear to take possession the next day.
If all is acceptable with the wire transfer and final walk through, the buyers and sellers sign the final closing documents, and once the deed is officially recorded (typically 3 hours after paperwork is signed), then the buyer may legally possess and move into the home.
I hope this gives you more insight into North Carolina's home buying process. If you are looking to make the big move to the Charlotte, NC area and purchase a home, do not hesitate to reach out for assistance!
Justin Yingst
NC/SC Real Estate Agent
Keller Williams Ballantyne
704-565-9413
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