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  • Writer's pictureRebecca Richardson - Mortgage Consultant

These Homebuying “Problems” Might Not Be As Problematic As You Think

Sometimes your homebuying process can hit a few snags along the way. Some problems can be more damaging to your timeline than others, and some problems might not be problems at all. In the blog below, I’m going to explain a few “issues” that might come up during your homebuying experience, explain why they happen, and show you that they might not be problems after all.

What Happens if Your Pre-Approval is Higher Than Your Homes Sale Price?

Getting pre-approved is the best first step to take when starting your homebuying process. But if the amount that you’re pre-approved for is higher than the price tag of the home you’re eyeing to purchase, you probably shouldn’t go out and spend all of that ‘extra’ money.

Unless your loan is set up in a specific way, you won’t be able to use any of that money towards appliances or repairs. Rather, your final loan amount will be based on the sales price of the home or the appraised value—whichever of the two is less.

So, for example, if you were approved for $400,000 and you find your perfect home for $350,000, you don’t have an extra $50,000 to make updates to the home. That’s because your down payment and loan amount will be based on the $350,000 sale price of the home rather than your $400,000 pre-approval.

If you are pre-approved for an amount higher than the home you want to buy and there are repairs that you want to make on the house, there are loan products out there which can include repairs and renovations. For those types of loans, it’s best to talk to an expert, like myself, to see if this might work for you.

What if Your Home Appraises for More Than the Sales Price?

I had a client’s appraisal come in and appraise for almost 10% more than they were buying it for. Seeing that appraisal was like a ray of sunshine for my day because it means that this client is about to get some instant equity. Basically, from day one, the home is worth more than you paid for it, which means you can tap into that equity for some great things. You can use this equity to:

  • Remove private mortgage insurance faster

  • Get a home equity loan to make some home upgrades or renovations

  • Raise the price of the home and have the seller pay your closing costs

Whether you decide to roll up your sleeves and put that money into remodeling or just enjoy living in your home that’s already worth more than what you paid for it, instant equity immediately turns an okay real estate prospect into a great one. What if You Have Too Much in Seller-Paid Closing Costs?

Is there such thing as too much of a good thing? Never, and that applies to real estate too.

Buyers can sometimes have too much of a good thing when the seller is providing seller credits that are greater than the closing costs on that home.

It can feel a bit like a double-edged sword, however. On one hand, it’s a relief knowing that you don’t have to come up with an extra 2-5% of the sales price to cover closing costs. On the other hand, it can be a bit disheartening to think that some of the seller-paid closing costs will go to waste.

But, like most things in real estate, there’s a creative solution. Whenever this happens with my clients, we come up with smart ways to use the leftover credits. This could be to lower the rate by paying points or potentially pre-paying some homeowners association dues. After all, you can never have too much savings in real estate!

These homebuying problems are anything but. I love being able to save my clients as much money when buying a home as possible. If you’re interested in running into any of the three examples listed above to save on your home, reach out to a member of my team!

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