Buying a home for the first time can be scary. To make your home-buying process easier, our real estate agents have put together a list of valuable advice for first-time home buyers in and around Wilmington, NC.

What do you need to save up for?

When you’re preparing to purchase a home, there are three main things you should start saving your money for:

  • Down Payment – Your down payment will depend on your lender and the mortgage you choose. Certain conventional loans require as little as 3% down, but more often than not, lenders will require a down payment closer to 20%. Regardless, even a 3% down payment can add up to. Say you’re hoping to purchase a $300,000 home – 3% of that would be $9,000 (and 20% would be $60,000).
  • Closing Costs – These are the expenses and fees buyers pay to complete a mortgage. They fall between 2% and 5% of the loan amount. It is possible to save a little on closing costs by asking the seller to contribute to the closing costs or pay for the home inspection (although; they are not required to comply).
  • Moving Expenses – Once the purchase is official, you still need to have some money on-hand to account for costs associated with moving, including any immediate home repairs, improvements, or new furniture. You’ll want to put aside several thousands of dollars just to make the move.

REMEMBER: Although housing prices may gradually start falling back to pre-pandemic levels, it is still a good idea for North Carolina home buyers to budget high. 

How important is your debt-to-income ratio?

When determining whether you can afford to buy a house, you should not only consider the costs, but you also need to be aware of things like your credit score and debt-to-income ratio.

A low debt-to-income ratio is critical to ensure you stay within your home-buying budget – not only in the short-term (with the down payment, closing costs, and moving expenses), but also in the long term (with your monthly mortgage rate). 

Plus, lenders often place a great deal of weight on your debt-to-income ratio. In most cases, lenders prefer your overall debt to be only 40% of your income. And any housing debts should fall under 32%.

How to check (and build) your credit score

Your credit score is one of the other big factors lenders consider. A low credit score could disqualify you from a loan AND have a big impact on the interest rates lenders offer. Our team recommends first-time home buyers aim for a minimum credit score of 640.

But how can you check your credit score?

You can get FREE copies of your credit reports from certain credit bureaus, including Experian, Equifax and TransUnion. If you see any errors in your report that could harm your score, you can even dispute them.

To boost your score, make sure you pay all of your bills on time and keep your credit card balances as low as possible. DO NOT close any current credit cards. Doing so can actually lower your credit score.

What are your NC mortgage options?

In North Carolina, home buyers have a variety of home loan options – all with varying eligibility and down payment requirements. The main categories include:

  • Conventional Loans – The most common home loan, conventional loans are left entirely to the individual lender’s discretion. With a credit score of 620 or higher, you can secure down payments as low as 3%. With these loans, you can usually stop paying mortgage insurance after a few years.
  • FHA Loans – Backed by the Federal Housing Administration, FHA loans offer more lenient financial requirements and are a plausible option for buyers who have credit scores in the 500 to 580 range. With an FHA loan, you could look at 3.5% down. But you will still need to pay mortgage insurance until you sell your home, pay off your loan, or refinance to a different type of mortgage.
  • VA Loans – Guaranteed by the Department of Veterans Affairs, VA loans are reserved for current and veteran military service members. Arguably the best mortgage rates, they usually require no down payment, no ongoing mortgage insurance, and a minimum credit score often around 620.
  • USDA Loans – The U.S. Department of Agriculture backs these loans for people with low-to-moderate incomes who are buying homes in designated rural areas. Like VA loans, USDA loans require zero down payment. But, unlike VA loans, buyers still must pay (low) mortgage insurance rates, and lenders often require a credit score of 640.
  • North Carolina Housing Finance Agency Assistance – North Carolina also offers some state-specific interest rates and down payment help. The NC 1st Home Advantage Down Payment offers to $8,000 toward your purchase. However, to get such help, you must have a minimum credit score of 640 and a debt-to-income ratio under 43%. Learn more here.

NOTE: You also have options regarding your mortgage term. More often than not, home buyers choose a 30-year fixed-rate that is paid off in 30 years and comes with an interest rate that never changes. However, you can also opt for a 5-year rate, which offers a lower interest rate and larger monthly payments.

Once you’ve received several loan estimates, compare your options. DO NOT just settle on the first loan you are offered. In fact, the Consumer Financial Protection Bureau recommends requesting loan estimates for the same type of mortgage from multiple lenders to compare costs adequately.

When should you hire a Realtor®?

Once you’ve determined that you can afford to buy a home and have a general idea of your budget, you can go ahead and reach out to a local real estate agent. 

Do NOT feel like you have to wait until your mortgage loan is finalized before you can call a Realtor®. In fact, good real estate agents will offer up their expertise on mortgage lenders in your area and help you find options within your budget.

Need help choosing a real estate agent? Here are the 9 steps you should take.

Network Real Estate | Wilmington, NC Area 

At Network Real Estate, our agents know the Wilmington area like the back of their hands. We have agents specializing in neighborhoods and properties across New Hanover, Brunswick, and Pender counties. 

We don’t rest until our clients have moved safely into the home of their dreams! And once you’re in your new home, we will do all we can to ensure you have all the resources you need to succeed as a Wilmington area homeowner.

Looking to buy a home in Wilmington, Wrightsville Beach, Carolina Beach, or Kure Beach? We are here to help! Call us at 910-395-4100.