Topsail Island Real Estate Blog
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The Importance of Using a “Local” Lender
Avoid potential pitfalls of buying in a coastal market by using a local lender
I think that the common misconception to most consumers when they are looking at borrowing money to purchase a home is that “a lender is a lender”. I admit that in a lot of markets and in many instances, this can be the case. However, if you are looking to purchase in a coastal market, you likely need to think again. If you are purchasing a primary residence or a second home, or investment property, the obvious reason to choose a local lender is because you want to support the local economy in which you live or plan to live. By supporting the employees who live and work in this market, you are supporting the local economy as a whole. The more business that a local work force generates, the more money that they usually make and the more money that they spend as well. Its cyclical, we all need to support our local markets.
However, in addition to making the choice to support the local market, there are several other reasons that you need to consider using a lender in the coastal market in which you are purchasing. I promise you that making the choice to use local financing sources will make your transaction easier and as smooth as it can possibly be. Please consider the following:
- First, a successful local lender is going to generally be familiar or have a good working relationship with your real estate agent as well as your closing agent. This familiarity between the parties involved in your transaction will make things run as they should because everyone knows what to expect from each other in most cases and there is much less of a chance that things will fall through the cracks. There is also a level of confidence between parties to execute as needed because of this familiarity.
- Local lenders are more likely to use local appraisers… this can be a biggie. National organizations that don’t have local roots can often use third party appraisal management companies to provide their appraisal reports. This may or may not be a problem but in a lot of cases, these appraisal management companies end up assigning the appraisal to an appraiser who lives 3-4 counties away from the subject property and may not be familiar with the market or the area. This can lead to a poor appraisal report and ultimately problems with your financing.
- Coastal markets have potential pitfalls that other markets don’t have (i.e. flood insurance, wind/hail insurance, unique property types and a few others). The types of insurance that are often required in a coastal market are different (and typically more expensive) than in other markets. The changes being made to flood zones currently in process and to flood insurance, is substantial alone, without factoring in other potential issues that may arise. Your local real estate agent is going to be aware of many of these things but may not always know how they affect the loan process. A lender that is familiar with a local coastal market is going to know the right questions to ask regarding insurance, flood zones, condo investment property concentration, sufficient insurance coverage, etc in an effort to avoid potential problems that may arise over the course of your loan transaction. To put it bluntly… A mortgage transaction in a coastal market can be unique and you need someone on your team who knows what to watch out for and how to protect your best interests.
- Local lenders have a good working knowledge of other local service providers that will be useful to you throughout the process and even after you take possession of the property. This can include local insurance providers, surveyors, inspectors, property managers, electricians, HVAC companies among others. Your local lender, along with your agent, can be a useful tool in helping you to obtain good information on excellent service providers in the area. They also know the schools, the pediatricians, the dentists, doctors, etc.
In short, your local lender should not only exist to help navigate you through what could be a fairly unique home buying process, but they are also a great source of information to you in what may now be “your” local market as well! For all of the reasons mentioned above, along with several more, don’t make what could turn out to be a major mistake… be sure to use a local lender.
Buying Process 101 – Together We Are A Winning Team
North Carolina Closing Practices
Buying a house can be an exciting adventure, but if you do not know the process; it can also be a daunting and scary road ahead. If you’re considering buying a property in North Carolina and have either never purchased a property before, or this would be your first time purchasing in NC, then read on – there are some helpful tips!
The Home Search
Everyone thinks that the first step in searching for a home is just that – searching. Well, not so fast. While advances in technology help today’s buyers navigate the real estate market a little bit more independently; you still have to start at your bottom dollar. Literally. You need to speak with a lender to see how much you can afford. Now, this is not as scary as you might think. You’re not sitting down with someone to have them grill you about all of your financial shortcomings or where you’re hiding your money. It could be as simple as filling out an online application, following up with a lender on the phone or via email – and you’re all set! With stricter lending practices and changes in banking regulations, you may not know how much or little you can actually afford. Not to mention, there may be loan products out there to help you qualify even if you thought you wouldn’t. Once you have an idea of what your price range should be, you can narrow your focus to what you can afford, then to what you actually want to spend. Now, keep in mind when you’re choosing your lender, he or she will need to be licensed to write loans in the state that you are buying your home. A lender in Ohio may not be able to help you with your loan here in NC. I understand that it’s difficult to do such personal business with someone you may have never met, but I assure you that our team works closely with reliable and dependable lenders that we are happy to recommend. Even if your lender is licensed in the state of North Carolina does not mean they understand all of the practices here either. For instance, a lender in Raleigh may not consider the fact that you may require flood insurance. Or that coastal counties (any county that has land touching the coast) require a Wind and Hail policy. This is especially important when looking at condos, as only a very small number of lenders are approved to facilitate such transactions. Why is all of this important to you? When you’re in the final days of packing and moving; you don’t want to worry that your lender remembered to have all of these items in order so that you can close on time and not have to stay in the motel down the street, instead of your sweet new beach house.
Offers and Escrow
Now that you have your lender secured (or a few that you can choose from) and you have a home that you just can’t live without; the next step is, of course, the offer! How exciting! Once you and the seller have come to an agreement, you can toast to your new digs at the coast. And, then comes the real work. In North Carolina, we have what is called a Due Diligence Period within this offer. This is something that is still somewhat new to us North Carolinians, so if you purchased a house even just three years ago, you may not know what this is. So, pay attention! The Due Diligence Period is the period within which you (the buyer) will perform the necessary inspections (general inspection, pest, maybe even a survey) as well as secure all of your lending needs to ensure that not only you qualify for your loan, but the house qualifies for the lender. This process will include you sending all of the necessary documentation to your lender, the lender ordering and approving the appraisal and the underwriters at the bank approving you and your loan. When you receive your inspection summary from the inspector, you will likely go over it with your Realtor and decide if you need/want certain repairs or if maybe a monetary concession on the purchase price is in order. Or, if you’re lucky – it comes back squeaky clean! If during this Due Diligence Period your lender finds that this is not the house for you, or the inspections results are awful or you just decide that you don’t like the name of the road, you may back out with no consequences. You will, of course, lose your Due Diligence deposit if you put one down, but the Earnest Money will be returned to you. If you and your lender decide that this is still “the one,” and once all negotiations are done, you will proceed past this date and wait for the lenders to work their magic and for repairs (if any) to be made and pack your boxes! A day before closing, you will likely have a “walk through” of the property to ensure that all repairs are satisfactory and you are buying the product you intended to buy.
Closing or Settlement
From the time your offer was made into a contract, your Realtor was likely already on the ball in getting these documents over to an attorney’s office to facilitate the closing. That’s right – in North Carolina, we don’t utilize Title Companies or anything else – we are an Attorney State with regard to Real Estate. In fact, there are specifically “Real Estate Attorney” practices that handle these. They pull the title work to ensure that you are purchasing a property that is free of encumbrances (a fancy term for liens and such), they prepare the deeds, communicate with your lender regarding closing costs and fees so that you only have to make ONE check out at closing, they provide a venue for you to attend the “closing,” in order to sign all of the papers that the lender requires, as well as the deed and they even record the deed for you at the courthouse to officially make the home yours. Once the lender has funded your loan and the attorney has recorded at the courthouse – you get your keys! It’s a thing of beauty, really!
Owning Your New Home
That’s all on you, buddy!
Actually, while we are Realtors and our job is to find you a house; we take our roles very seriously and are always here for you, even after you close. If there is ever anything you need from recommendations for a painter or great restaurant to a pet sitter or baby sitter – we’re here for you!