8 Steps to Buying a House in North Carolina

Buying a house in North Carolina is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.

For example, homes in Raleigh are hitting the market at $493,558 and selling within 9 days — 21 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.

However, homes typically stay on the market longer in Cullowhee, so you'll be able to take your time and potentially find a better deal.

The more you know about the steps to buying a house and North Carolina's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.

No matter where you are in your home buying journey, Clever's concierge team can connect you with local real estate pros who will help you purchase your North Carolina dream home!

The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!

» START: Buy with a top local agent, save thousands with Clever Cash Back

Step 1: Save for a down payment

Your down payment is the initial portion of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.

Typically, mortgage lenders in North Carolina want you to contribute 20% of the purchase price as a down payment. That would be $63,066 for a $315,331 home — the typical home value in North Carolina.

However, you have options to lower your down payment amount.

Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).

» READ MORE: Everything you need to know about low-income home loans

But making a down payment of less than 20% comes with some risks.

First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.

Second, you may have to purchase mortgage insurance.

Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.

Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.

VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.

North Carolina down payment assistance programs

Are you having trouble covering a down payment on your own?

North Carolina offers several down payment assistance (DPA) programs for first-time and low-income homebuyers. Eligible participants can receive a grant or second mortgage that can go towards closing costs or a down payment.

Here are a few programs catered towards North Carolina residents that you can check out:

NC Home Advantage Mortgage

The NC Home Advantage Mortgage program offers a loan of up to 5% of the first mortgage for both first-time and repeat homebuyers. Eligible first-time buyers and veterans may even be able to receive an additional $8,000 through the NC 1st Home Advantage Down Payment.

Repayment of the loan is only necessary if you sell, refinance, or transfer your home within 15 years of purchasing the property. The loan is forgiven at a rate of 20% per year, starting at year 11. Buyers who remain in their homes for 15 years or longer will have their loan completely forgiven.

Maximum purchase prices and income limits apply and vary based on your location.

Community Partners Loan Pool

The Community Partners Loan Pool (CPLP) offers a 0% interest, deferred second mortgage to eligible homebuyers. It may be combined with an NC Home Advantage mortgage to receive up to 20% of the sales price (up to $30,000) or a USDA 502 to receive up to 10% of the purchase price.

To be eligible, your credit score must be at least 640 and your maximum household income cannot exceed 80% of the area median income. Borrowers are also required to take a homebuyer’s education course and complete at least two hours of housing counseling.

U.S. Department of Housing and Urban Development

Alternative DPA programs can be found on North Carolina's HUD page here.

Step 2: Get pre-approved for a mortgage

A mortgage pre-approval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.

Most sellers in North Carolina will require pre-approval before showing you their home.

You don't have to decide on one lender right now. In fact, you should compare interest rates and pre-approval amounts from several lenders to make sure you're getting the absolute best terms when you buy your North Carolina home.

To get a pre-approved for a mortgage, you'll fill out a mortgage application and provide details about your financial situation. They'll look at the following information to determine your mortgage pre-approval amount:

Total income

Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.

Personal debt

Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.

While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.

Because of this, you might consider paying off some of your other debts before applying for a mortgage in North Carolina.

Cash reserves

Mortgage lenders in North Carolina want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.

While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.

Step 3: Choose the right location

A house's neighborhood can be just as important as its layout and features. In general, you should consider the following factors when deciding which neighborhood is best for you:

What's your home buying budget?

Once you know your budget (a pre-approval letter will tell you the most you can expect to borrow), you can narrow your search to neighborhoods where homes are selling within your price range.

Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years. You want to choose a neighborhood that's in your budget, but could also lead to a big return when you decide to sell.

To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Raleigh:

Home value appreciation in Raleigh

Local lifestyle

Once you have a list of neighborhoods with homes in your budget, you should evaluate how well each one meets your personal needs and preferences. To finalize your list of target areas, consider factors like:

• School districts
• Your daily commute
• Crime rates
• Restaurants and amenities
• Transportation options

Step 4: Find a great real estate agent in North Carolina

Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent should be an expert on buying a home in North Carolina.

They'll help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in North Carolina.

Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. you should pay attention to a realtor's:

• Years of experience
• Number of transactions in the last year (the more the better!)
• Experience in your price range
• Overall review score
• Individual reviews and complaints

Ask each of them questions about your target neighborhoods, how they prefer to communicate, and their strategy for helping you find and close on your new home. You should feel comfortable with the agent's knowledge, experience, and process before committing to an agent.

Step 5: Start house hunting in North Carolina

Searching for homes in North Carolina is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.

Prioritize your needs vs. wants when buying a home in North Carolina

Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."

Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.

Look at current housing inventory

The timing of your house hunt in North Carolina can have a big impact on your number of options. For example, in North Carolina, May has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.

On the other hand, January gives you the fewest choices in North Carolina. Historically, there are 32.4%) fewer homes for sale than during North Carolina's peak season.

Housing inventory in North Carolina by season

Step 6: Make an offer

Once you find a North Carolina house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.

Currently, in North Carolina, homes stay on the market for 80 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.

Historically, North Carolina homes sell fastest in May, where the average property is only on the market for 67. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.

On the other hand, if you buy in December, you have a bit more time to search. Homes typically stay on the market 21 days longer than North Carolina's annual average.

Average time homes spend on market in North Carolina

What should your offer include?

Your real estate agent can help you decide which of these common options you should include in your offer:

• Seller concessions: You'll have to pay for most of your closing costs out of pocket when you buy a home, but you may be able to ask the seller to cover some of those costs for you. This option may allow you to offer a higher purchase price and essentially include your closing costs in your mortgage.
• Repair credits: If the home is in need of repair, you could ask for credits instead of having the seller make and pay for the repairs. The seller avoids the hassle of waiting for contractors to complete the job, and you get to oversee the repairs in the future to make sure they meet your expectations.
• Inspection contingencies: Most purchase agreements have inspection contingencies that allow you to change your offer (or back out all together) if the inspection turns up major problems. If you have a high degree of certainty about the house's condition (like if the seller can show you a recent inspection report), you can forgo this contingency to give the seller a higher sense of confidence.
• Letter to the seller: Many sellers have a personal attachment to the home. They've lived there for years and want to know the next owner will take care of the property. Writing a letter to the seller can show them how you picture your life in the house and appeal to their sentimental side.

Step 7: Inspections and appraisals

Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.

Home inspections in North Carolina

Having your North Carolina home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.

Your inspector should check out the following parts of the property:

• Roof
• Foundation
• Electrical system
• HVAC system
• Plumbing

If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.

North Carolina-specific inspections

Although sellers in North Carolina are required to disclose known issues to interested buyers, it's ultimately up to the buyer to ensure that a property is safe. In addition to a general home inspection, it's highly recommended to perform more specialized tests to check for a couple key issues that may go overlooked.

Before closing on a home, consider having the following inspections done:

• Radon testing: Elevated levels of radon are toxic to your health, so it’s best to do a test if the seller hasn't performed one within the past year. You can order a free radon test kit from the North Carolina Department of Health and Human Services here.

• Termite and pest inspection: Even if your lender doesn't require you to have a pest inspection conducted, it's a good idea to catch any infestations early. Termites and other critters can cause structural damage and pose health risks to your family, so it's strongly recommended to have the home inspected before closing.

Appraisals

Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.

» LEARN: 3 options for buyers after a low appraisal

Step 8: Close on your new home!

Once you finish your inspections and your lender approves your financing, you'll be ready for closing! Closing is the process of finalizing your mortgage and transferring ownership of the property.

On closing day in North Carolina, you'll meet at the title company to complete some paperwork and settle your closing costs.

First, you'll be required to review and sign several legal documents, such as:

• Your final loan application
• The deed
• The mortgage promissory note
• The disclosure statements

There will be a lot of paperwork to complete, so plan to spend about an hour to complete the documentation process. Be sure to ask your agent if you have any questions before signing anything.

After completing the paperwork, you will have to pay your closing costs. The title company makes this easy by collecting the total amount you owe and distributing the correct payments to every recipient.

You closing costs will likely be separated into four separate categories:

• Lender fees: Fees paid to your mortgage lender for all services related to your loan. This payment will cover appraisal fees, mortgage points, and the preparation of your loan.
• Title and escrow charges: Fees paid to your title company. These charges are for the title search, documentation, title insurance, and facilitating the closing process.
• Prepaid costs: Ongoing costs of homeownership. Most lenders require new homeowners to pay certain predictable expenses up front, such as property taxes and homeowners insurance.
• Other closing costs: Miscellaneous expenses that are different for each buyer. These costs may cover natural disaster certification fees or real estate attorney fees.

Buyers in North Carolina typically pay 3-5% of the purchase price in closing costs. For a $315,300 home — the typical home value in North Carolina — that's between $9,459 and $15,765!

» MORE: Closing costs for buyers in North Carolina

Frequently asked questions

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