The Ultimate Guide to Buying a Home in Raleigh, NC
Sometimes buying a home is easy. Sometimes.
Most of the time, it's a big, complicated, emotional, stressful, chaotic process that takes all the energy and patience you can muster to get to the finish line. For anyone worried about navigating that treacherous landscape, this guide is for you, because buying a home should be easy. It shouldn’t sap every last bit of joy out of the process and make it miserable to everyone involved. When you buy a home, it should be an exciting time in your life, and you should be happy about it! That's why I made this guide.
My name is Corey Crossman, and I'm a real estate agent serving Raleigh, NC and the surrounding areas. I've seen firsthand the madness that can transpire during the home-buying process, but if you work with the right people, educate and empower yourself, and follow the right plans, you can make it easier on yourself and everyone involved.
When you’'re done reading this guide, my hope is that you will be a little more informed than you were before and ready to take the next step toward a better, easier, more stress-free homebuying process. Because buying a home should be easy.
STEP 1: GET YOUR FINANCES IN ORDER
Before you can make an offer on a home, you need to know what you can realistically afford. This requires working with a good lender, or shopping around to find a lender that best meets your needs, and then taking the right steps to get pre-approved for a home loan.
In most cases, sellers require that potential buyers send along a pre-approval letter or proof of funds with any offer to purchase a home, so it is critical to have all your financing options in place and ready to go before you even start looking at homes. If you should stumble upon one that you love and you decide you want to make an offer right away, you'll be ready to go knowing that you've already gotten pre-approval from a lender. Falling in love with a $500,000 home and then finding out you can only afford a $400,000 home is a heartbreaking letdown, and it's not one that you should leave yourself open to.
If you're still very early in the process of looking for a new home and haven't begun to think about all these steps yet, there are some quick and easy things you can do to get your finances in order and take stock of your situation.
Create a list or a spreadsheet with all your current recurring debts on it.
Be sure to include car payments, personal loans, credit cards, and other lines of credit you have that get paid down every month. Costs like food and gas don't need to be included here.
Calculate your living expenses under the 28/36 percent rule.
If you're not familiar with this, the rule comes from a traditional process followed by lenders to determine a borrower's suitability for obtaining a loan. The rule states that your housing expenses (including principal, interest, taxes and insurance) should account for no more than 28% of your monthly gross income (gross being before tax). And your total recurring debt, which would be your housing expenses plus all the debts from bullet point number one, should account for no more than 36% of your monthly gross income.
That means roughly 28% of your monthly gross income should be your target ceiling for a monthly housing payment. For example, if you make $5,000 a month before tax, you should be thinking about a housing payment no higher than $1,400 a month. Now, if you don’t fall within the 28/36 ratio, that doesn't mean you can't get approved for a loan. Lenders have a wide variety of loan options that fit many different financial situations. But if you're just thinking about ballpark numbers, the 28/36 rule is a great place to start.
Check your credit score.
This is another factor that lenders will consider when they're evaluating you for a loan, and if yours is relatively low, you may want to take some steps to try improving it before you begin the loan application process. Regardless of what your score is, being aware of it is a very important step when preparing for loan application.
Lay off the big purchases.
When you start the process of applying for a loan, the lender is going to scrutinize your transactions and will look negatively at any big credit purchases or new loans you take out before you get approved for your mortgage. Buying a new car or splurging on new furniture before you have loan approval from your lender is a big no-no, because it can throw off your debt-to-income ratios and change your qualifications for loan approval. The last thing you want to do is make an offer on a home and get disqualified for the loan because of unnecessary big purchases made during the waiting period. If you absolutely must finance a big purchase while you're trying to get approved for a mortgage, it's always best to check with your loan officer first.
Some final advice about financing.
Some final advice on finances: when you're shopping around for different lenders, consider more than just the interest rates they're advertising. When you take out a home loan, there are other costs like origination and admin fees that will need to be paid by you on the day of closing. A lender who is offering a 4.25% interest rate may look more appealing than one offering a 4.375% interest rate, but if there are thousands of dollars in up-front fees on the loan with the lower interest rate, you may end up paying more than you expected. And if at any point the loan process is confusing or frustrating for you, your agent can help guide you or make recommendations for good lenders to work with. Which leads us right into our next step.