How to Buy in the Tar Heel State with a Conventional Mortgage in North Carolina
6 minute read
December 29, 2022


A conventional mortgage is one of the best ways to buy a home in North Carolina. 

As you learn more about this type of loan, you may realize that it’s perfectly suited to your current situation and future financial goals.

Check your mortgage options

What is a conventional mortgage?

There are three basic details you need to understand:

  • A conventional mortgage is a conforming loan meaning that they must stay within limits set by two government-sponsored enterprises
  • Conventional mortgages meet Fannie Mae or Freddie Mac requirements 
  • Fannie Mae and Freddie Mac purchase loans from lenders and sell them to the private sector 

These three details, among others, make a conventional mortgage unique. 

The advantages of a conventional mortgage

It’s best to learn more about the advantages of the loan options available to you, including the conventional mortgage before you apply. The knowledge you gather can save you both time and money. 

One of the primary advantages of the conventional mortgage is the ability to buy with as little as 3% down. Even if you’re not a first-time homebuyer, you can still proceed with a down payment as low as 5%.

If you have 20% to put down on a home purchase, you can avoid having to pay private mortgage insurance. Once you reach 20% equity in your home through monthly payments, you’ll no longer have to pay for PMI. 

Another point of consideration is that you can use a conventional mortgage to purchase a single-family home, second home, or investment property. This gives you the flexibility to reach all of your home-buying goals.

Are there any drawbacks of a conventional mortgage?

There are some potential drawbacks associated with a conventional mortgage, including:

  • Stricter credit requirements than other loans, including a minimum score of 620
  • Debt-to-income (DTI) ratio must be below 50% to qualify 
  • A bankruptcy or foreclosure in your past is a red mark on your application 

On the plus side, there are steps you can take to overcome these potential drawbacks. 

For example, if you have a low credit score, you can take steps to increase it in the months leading up to your mortgage application, such as making consistent monthly payments on time. 

Documents needed to qualify for a conventional mortgage

There’s no shortage of documentation required to apply for a conventional mortgage, but it’s not nearly as complex as it sounds. All of the documents you need are readily available to you. These will likely include the following (though it will vary by lender):

  • Tax returns for the past two years
  • Proof of income, such as pay stubs and W-2s
  • Bank statements 
  • Photo identification, such as a driver’s license
  • Rental history (if applicable)

If your mortgage lender requires additional documentation, they’ll request it during the underwriting process. Don’t delay in complying with these requests as doing so can slow down the process. 

What will the housing market look like in North Carolina in 2023

Various factors have the potential to affect the U.S. real estate market in 2023. There’s no way of knowing exactly how the market will transition in the new year. 

However, Norada Real Estate Investments notes that housing inventory was down in December 2022 and housing prices increased by nearly 5%. The median sales price for North Carolina homes in December 2022 was $344,500.

If you have plans to buy a home in North Carolina in 2023, keep a close eye on the real estate market throughout the state. The data you collect may impact where you buy, the type of home you buy, how much you spend, and how you negotiate. 

Here’s a list of the 10 metro areas in North Carolina with the fastest-growing sales price.

  • Sunset Beach
  • Newton
  • Huntersville
  • Elizabeth City
  • Graham
  • Wilmington
  • Shelby
  • Lexington
  • High Point
  • Greenville

How to apply for a conventional mortgage loan in North Carolina

By now, you’ve probably formulated an opinion on whether a conventional mortgage loan could work for you. If you’re on board with the idea, here are five steps to take.

Check your mortgage options

1. Get preapproved for a loan

Preapproval will benefit you in many ways. First off, it tells you how much money you can afford to spend on a new home. It’s not an official loan commitment but it will let you know how much your lender is willing to loan you. 

Secondly, it shows the seller that you’re serious and able to complete the transaction should you settle on a price.

2. Consult a local real estate agent

In addition to searching for homes online, consult with a local real estate agent who can provide you with professional assistance every step of the way. An agent from that area will be able to give you insight into the local market and get you desired listings before they go online.

Tip: Use HomeScout, an all-in-one homebuying service, to power your search. This tool will help you find an agent, home listings, and a lender all at once. 

3. Review your budget

Don’t make assumptions when it comes to your housing budget. You need to know how much you can afford to pay each month, as well as how the payment will impact the rest of your finances. 

Before you begin your hunt, add up all of your monthly expenses and subtract that total from your monthly income. Financial advisors recommend that you spend no more than 30% of your budget on housing per month, if not less. 

4. Decide on a down payment

First-time homebuyers can use a conventional mortgage to purchase a home with as little as 3% down. 

Use a mortgage payment calculator to understand the impact of varying down payments on your monthly payment and total loan obligation. 

5. Run the numbers

For example, a loan comparison calculator can help you understand the differences between a fixed rate and adjustable rate mortgage. Take as much time as necessary to compare your options. There’s never a good time to rush when crunching numbers associated with buying a home.

Get your conventional mortgage with AAA Banking

At AAA Banking, it’s our goal to help you qualify for the loan you need to purchase your dream home. We make it easy to get started online and start your application process. 

Of course, you have the option to contact us by phone at (844) 897-2265 M-F; 8-8:00 pm EST. Our experienced team will be here to answer any questions you have about the homebuying process.

Image by Paul Brennan from Pixabay

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