Buying Outer Banks Real Estate
Buying a New Home
You’ve decided to purchase a new home. This is an exciting time for you and I look forward to guiding you smoothly through this process, helping you to efficiently find the home of your dreams.
As you will see, there are several steps you need to take before you move into your new home.
What Can You Afford?
Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford. One of the most important factors in figuring out your financial budget is getting pre approved for a mortgage.
When applying for a mortgage, you will need to furnish information regarding your income, expenses and obligations. To save time, have the following items available for each borrower:
- Two most recent pay stubs
- W-2s for the last two years
- Federal tax returns for the last two years
- Last two months’ bank statements
- Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)
Pre-approval uses basic information and electronic credit reporting to determine whether a lender will loan you money. If you are pre-approved for a mortgage, the lender has given you a commitment to support your new purchase.
Pre-qualification is an estimate of what you can afford. When you pre-qualify for a mortgage, the lender collects information regarding your income, credit history, monthly debts, and assets. This information is used to calculate an estimated mortgage amount.
Buyers that are pre-approved for a mortgage are attractive candidates to the seller and have a better chance of getting the property when they make an offer. A lender will lend you money if they’re positive your credit is strong and you have the ability to pay them back.
When is the best time to buy a house? With many markets reporting a surplus of homes for sale, and interest rates at near historic lows, now is the best time recorded history.
Following are some things that every homebuyer should keep in mind:
Don’t Try to Time the Market When home prices are low, it is tempting for buyers to wait as long as possible in the hopes that prices will decline even further. This strategy can be detrimental because smart sellers price their homes according to current conditions. When a property is priced at what the current market will bear, buyers will make offers.
Look Around The surplus inventory gives buyers an opportunity to compare many homes that match their needs. However, if you find your dream house, put in your bid and negotiate. Procrastination provides an opportunity for another buyer to make an offer.
Watch Mortgage Rates Pay attention to the mortgage rates and recognize that a fraction of a percent will affect your monthly payment.
Questions to Ask Your Lender
- Which type of mortgage plan do you think would best for us? Why?
- Are your rates, terms, fees, and closing costs negotiable?
- Will I have to buy private mortgage insurance? NOTE: Private mortgage insurance is usually required if you make less than a 20-percent down payment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
- What escrow requirements will I have?
- How long is your rate lock-in period? Will I be able to obtain a lower rate if they drop during this period?
- How long will the loan approval process take?
- How long will it take to close the loan?
- Are there any prepayment penalties?
Buying Your Vacation Home
Vacations are a quality of life that isn’t changing. Due to changes in air travel, more people are vacationing within a day’s drive of home. In our hectic lives we dream of a place where we can go and “escape” it all. We’ll help make your dreams come true.
Can I afford a second home?
In addition to your mortgage payments, taxes and insurance, there would also be maintenance and travel costs to and from your primary residence. To offset some of these expenditures, you may want to consider renting your property or even investing in a home-site now and building later.
What type of property is best for me?
Single-family detached – From a beach box to a waterfront estate, you have many choices. Single-family properties offer privacy and fewer restrictions than attached housing. The trade off for the single-family homeowner is the responsibility of exterior maintenance and landscaping. Single-family detached properties are generally more expensive than attached properties of comparable size.
Attached housing – From a studio condominium to a luxury townhouse, the choices vary here too. With an attached property, you typically own your particular unit and share ownership of the common-area amenities with other homeowners in the development.
You may or may not be able to own the land under your dwelling. A Condo association normally governs through written protective Covenants and Restrictions. Always read these carefully before your final decision to purchase, since all property owners in a development must comply with these terms and conditions. Monthly association dues are customary to cover the cost of exterior maintenance, taxes, fire insurance and reserves for future repairs. In some developments, portions of your utilities may also be included in association dues.
Let your interests guide you when deciding which type of property to buy.
Financing a second home?
Financing a second home is similar to financing your primary residence. A lender will evaluate your bank deposits, credit history and rating, debt-to-income ratios, and verify employment.
Lenders require a minimum down payment of 20%.
There are certain guidelines most second-home lenders take into consideration:
- The property should be remote in distance or time of travel from your primary residence, but at a reasonable enough distance to function as a second home. Some lenders require it be a minimum of 50 miles from your residence.
- The property must be located in a resort area that would generally appeal to vacationers.
- The mortgagor (you) can rent out the property, but the property cannot be subject to an agreement that gives a management firm total control over the occupancy.
The lender will evaluate the appraised value of the property, its suitability for year-round occupancy and its conformity with local zoning regulations.
Who will take care of the property when I am not there?
Since you won’t occupy your vacation home on a year-round basis, you should consider ways to maintain your investment when you’re not there. Property management is available on a fee basis with a wide range of services.
If you plan to rent your property, using a professional property manager is highly recommended. They offer a variety of services including advertising, rent collection, renter relations, security deposits and cleaning. And most important, they will keep an eye on your property while you’re away.
What tax benefits may be available to me?
Second-home ownership will offer certain tax advantages depending on the use of the property. In the United States, interest and property taxes on second homes are generally tax-deductible on your Federal income tax, and certain other rental expenses may also be deductible. Tax rules and regulations change frequently, so you should consult with your tax advisor prior to purchasing your second home.
Questions to Ask a Seller When Considering an Offer
If you are considering making an offer on a home, you may want to gather some information about the seller and their history with the home. You can determine a seller’s motivation by asking some simple questions:
Why are you selling?
How long have you owned the home?
What types of repairs have been done recently?
Tell me about the neighborhood?
Work with your agent to learn as much as possible about the property and it will help in the negotiation process.
Prepare for Closing
After negotiating an offer, you may surprised by the amount of work required for a successful closing. As you prepare to complete the purchase and move into your new home, consider the tips offered here concerning the most important tasks facing homebuyers.
After you have filed your loan application and placed a deposit on the home, your mortgage lender will provide you with a good faith estimate of closing costs. The amount provided by the lender is an estimate and can change prior to closing. You should inspect all the loan documents the day before closing. Once you have confirmed the amount, including the remainder of the down payment, you will need to obtain a certified check.
Most real estate professionals recommend a final walk-through inspection of the home before finalizing the sale. The contract between both parties will include a clause allowing the buyer to inspect the property within the 24 hours prior to closing. At this time, the buyer should make sure the home is vacated and in the condition expected to take procession. If any problems are uncovered during the inspection, work with your agent to obtain funds from the seller for repairs or postpone the closing until all repairs are made.
Another requirement of the closing process is the purchase of homeowner’s insurance. Required by nearly all mortgage lenders, this insurance protects both homeowner and lender against loss in case of damage to the home. Most homeowner’s insurance policies will include personal liability for the buyer – protecting the homeowner in the event of accident or injury on the property – and a combination of coverage against theft, fire, flood and region-specific weather concerns. At closing, you will need to provide proof of insurance to the mortgage lender before finalizing the sale.
In some cases, title insurance may also be required by your mortgage lender. This policy protects both the buyer and lender in the event that problems with the title are uncovered after the sale is finalized. If required, both the lender and homeowner need individual title insurance policies, yet these are usually combined into a joint policy to be financed by the buyer.
Two days before the closing date, the buyer should request transfer all utility accounts from the seller be put in the buyer’s name at 5pm on the closing day.
On closing day, you can expect to sit down with your legal representation to finalize the sale. If you have completed the steps outlined here and arrive with proper documentation, you can expect a smooth closing.