From preparing the paperwork to wishing for a smooth pre-approval process to finding your dream home, the whole home-shopping experience can be quite long, arduous, and tiring. Needless to say, a thousand and one things could happen along the way that could potentially derail your plans of being a homeowner.
Just like any problem, the best way to avoid any inconvenience is knowing exactly what to look for and doing your due diligence throughout the process.
Here are some common snags to watch out for.
Income and Debt Variables
When you start the home loan process, you must provide a detailed list of your income and an overview of your debts. Then, keep a record of your financial situation and determine the price of the house you can afford. While there are some things you can’t plan for, like job loss or unexpected medical bills, there are some aspects within your control, such as keeping your finances stable during the buying process. This means try not to build up new debt (whether from your credit card or any other source) or decide on anything abrupt (such as leaving your job) until you close your house. This will prevent you from having to recheck your income and debt ratio.
The mortgage industry is a human industry, and as such, we cannot discount the fact that human error might happen now and then. Whether it’s a spelling mistake of a name or an incorrect number, a lot can go wrong when submitting the documents you need to buy a home. The best way to avoid these errors is to double-check and triple-check your documents as you upload them. Doing your due diligence upfront can avoid later problems when it’s time to start closing.
An inspection on any home purchase is highly recommended; even though it’s upfront and an additional cost, it can save you thousands of dollars down the road if you have obvious issues after moving. Inspections are one of the most important steps in the home loan process, but they can also cause some of the biggest hurdles. For example, if an inspection of your home reveals the need for major repairs, you may need to return the day it closes. If you find that your home needs repairs, you can negotiate with the seller to pay for them before closing, or you can ask for a lower sale price to budget for the repairs. An inspection can reveal issues in your home that can cause delays, but it’s an important step in making sure your new home is livable.
Appraisal is Too Low
An appraisal is an important (and mandatory) step in the mortgage process because it assesses the value of the home you buy against the amount you are financing. It’s also a way for lenders to make sure they’re financing a home for what it’s worth. It is, therefore, a crucial step to ensure the success of all parties. In most cases, the amount you finance should be equal to or less than the home’s value. However, due to this rule, you may end up with delays in closing if your home is valued for less than what it is worth. If this is the case, you may need to be re-approved for the new loan amount, negotiate the price with the seller, or pay more out of pocket to balance the value.
Buying a home is certainly an exciting yet stressful experience, but sometimes, you can avoid the unnecessary stress as long as you put in the due diligence necessary to avoid the pitfalls, we just laid out above. To know more about the rigors of home lending, you can reach out to TLC Lender.