Mortgages are Complicated, But Not as Complicated as you Think
The mortgage process can appear to be complex, and that perceived complexity can make your homebuying process that much more stressful. But at the end of these days, the intricacies of mortgages aren’t as complicated as you might think.
In the blog below, I’ll break down some of the most common preconceived notions regarding mortgages and explain them in layman’s terms to ease your nerves.
Why Do Loans Get Denied?
Mortgage loans get denied for a variety of reasons. Sometimes, it can be down to the buyer’s actions—maybe they quit their job, took on new debt, or another factor changed their financial picture. Other times, it’s because the pre-approval wasn’t accurate.
When you apply for a loan, the lender will review the financial information you’ve provided, such as your credit score and supporting documentation like W2s, paystubs, etc.
If this process is rushed or only partially done, it can put the buyer’s approval in danger. That’s because these files are reviewed in detail to make sure they meet loan guidelines. If the upfront review isn’t thorough, avoidable issues will be discovered once under contract and the loan could get denied.
There are easy ways to avoid these holdups, though. My advice would be to get preapproved at least 1-2 months before you want to buy. This gives plenty of time to have a strong preapproval that’s highly likely to result in a final approval. Ideally, you’re living in the home you buy for at least a handful of years, so take the extra time on the front end to make sure your process goes as smoothly as possible.
Why Your Homebuying Experience Differs From Others
When making a big commitment like buying a home, it’s only normal to talk with other recent homebuyers and compare notes on things like loan programs, rates, and other details regarding the process. It can lead to quite a bit of confusion if their recollection of the process differs from what your lender has told you.
Believe it or not, this is more normal than you may think. But why?
Every individual’s financial situation is different, and even just minor differences—like a credit score, down payment savings, and even the neighborhood the home is located—can lead to some differences in the process.
What matters most, though, is working with a loan originator who you trust to give you financial advice that’s best suited for you and you alone. At the end of the day, everyone’s financial situation is different, making each homebuying experience unique to the borrower.
Home Didn’t Appraise. Now What?
You may have read somewhere, or even experienced firsthand a home not appraising. What does that even mean?
When a house doesn’t appraise, or if it’s a low appraisal, it means that the value assessed by the appraiser is lower than the agreed purchase price of the home. When that appraised value is lower than the agreed price, it limits the amount a lender will finance as they base the loan on the appraisal.
There are a few options that can save you from losing your dream home with a low appraisal, though. Buyers can make up the difference of the appraised value and contracted value in cash, renegotiate the purchase price, or exercise their appraisal contingency to walk away from the sale and get a return on their earnest money deposit.
In a hectic housing market, it’s even more important to work with real estate professionals that you trust to get financial advice that works best for you and you alone. My team and I are proud to represent buyers from all walks of life, so if you’re trying to start your homebuying journey, let’s get in touch!