Problems that Arise During the Process of Buying a Home
It’s no surprise that the world of real estate hosts a set of complex processes; home buying in 2023 is not easy! To best navigate the home-buying process, it’s important to be prepared for bumps in the road and to arm yourself with the knowledge about the most common issues buyers run into. These basic steps will prep you for a smoother path to home ownership and will help to build your buying-a-home checklist!
Increasingly Common Bidding Wars
One reason why it is harder to buy a house now is all the competition. With increasingly competitive real estate markets, bidding wars are popping up everywhere. Bidding wars happen when multiple buyers show interest in a property, causing the seller to entertain multiple offers. Potential buyers must then compete against each other to secure the property; home ownership battle royale style.
Bidding wars are known to drive up the property’s overall price. These higher prices can make it challenging or even impossible to secure the house within a buyer’s initial budget.
One way to tackle this issue? Work with a real estate agent to determine budget, limits, and competition tactics and techniques. Their experience will give you a better idea of how to successfully navigate the competition. Get a better idea of what it takes by taking a look at our guide on how to win a bidding war.
Financing and Mortgage Approval
Another problem that can arise comes from financing and mortgage approval. Even if you are pre-approved for a mortgage, there is still a chance that your application might be rejected during the final approval process! We’re aware, this isn’t the most motivating news.
Rejection at this point is usually due to changes in your financial situation, such as job loss or a drop in credit score. To minimize the risk of rejection, focus on providing evidence of financial stability. For example, avoid making expensive purchases or taking on additional debt during the process of buying a home. We know that the couch you found at Anthropologie would look great in your living room, but honey, wait to buy it until you’ve got the key to the house! Otherwise, you might end up without a living room to put it in.
Buying a home with bad credit can be difficult. To make things easier, communicate regularly with your lender and provide all necessary documents early on to expedite the approval process.
Mortgage Approval Paperwork Checklist
These documents are most commonly requested to determine a buyer’s eligibility for mortgage pre-approvals:
Proof of income
Recent pay stubs: Typically covering the past 30 days, these documents show your year-to-date earnings, deductions, and other relevant details.
W-2 forms: These forms provide a summary of your income and taxes withheld over the past two years.
Tax returns: Lenders may require your federal tax returns, including all schedules, for the past two years if you are self-employed or have additional sources of income.
For self-employed individuals: If you own a business or work as a freelancer, you may need to provide additional documents like profit and loss statements, business tax returns, or 1099 forms.
Asset documentation to verify available funds
Bank statements: Recent statements from your checking, savings, and investment accounts, typically covering the past two to three months.
Proof of other assets: Such as stocks, bonds, or real estate holdings.
Employment verification to ensure a stable income
Employment verification letter: A letter from your employer confirming your position, salary, and length of employment.
Employer contact information to independently confirm the buyer’s employment.
Identification and personal documents
Valid ID: Such as a driver's license, passport, or other government-issued ID.
Social Security number: Lenders need your SSN for credit checks and to verify your identity.
Residence history: Documentation of your current and previous addresses, typically for the past two years.
Remember: documentation requirements can vary depending on the lender and the type of mortgage you are applying for! Get in touch with a real estate agent to learn more.
Home Inspections and Unexpected Repairs
Every home should undergo a thorough home inspection. Never waive this step, because while a property may look perfect on the surface, it’s possible that hidden issues exist that only a professional inspection can uncover.
For example, buyers: you do not want to purchase a home that has a decade's worth of hidden water damage! Dealing with it will not only cost a large sum of money but also a lot of your time. Just like people, it’s best to get to know the home before you commit.
Discovering unexpected repairs or structural issues is not only disheartening, but they could be major safety risks within and around the home. Dealing with these issues adds major costs to the overall price. And buying a home costs enough as-is! To mitigate the risk of expensive repairs, find a reputable home inspector (or ask your experienced Realtor for a referral!). It’s best to be present during the inspection process and come with questions prepared for the inspector to better understand the property's condition. Take a look at the different kinds of home inspections.
One exciting prospect of a thorough home inspection is price leverage potential! If the home inspector comes across significant damages or risks on the property, it can work out well for the buyer. The buyer may be able to leverage these potential costs against the overall price of the property or request repairs.
Pro tip: It is wise to set aside a contingency fund to cover any unforeseen repairs that arise, pre or post-purchase.
Delays and Difficult Closing Process
Delays in the closing process are so frustrating! Buying a home with a loan often means time spent waiting for paperwork to be completed.
Several factors contribute to these delays, like issues with the title search, problems with loan processing, or difficulties coordinating between parties. Yes, some delays are unavoidable or outside of the buyer’s and real estate agent’s control. Speed up what you can control by staying organized, communicating effectively, and ensuring all required documents are submitted promptly.
However, a lot of what happens during the process of buying a home is outside of your control. Remember that you can only do so much; don’t stress! If you take all the appropriate steps to be prepared the rest will fall into place with time.
What the Buyer Can Control
To make sure the approval process runs smoothly, buyers can focus on providing a complete and detailed credit history, employment verification, maintaining complete and sufficient down payment funds, and complete loan documentation.
In the event of an appraisal discrepancy, buyers will need to renegotiate the price with the seller, provide additional funds to bridge the appraisal gap, or seek a second review. This will no doubt delay the closing process somewhat but with the appropriate response, can be completed quickly if both parties are willing to cooperate.
When something unexpected is found during a home inspection, buyers should be quick to communicate with the seller side through their agent to resolve any issues. Buyers may need to negotiate purchase prices or address significant repairs, so it’s best to be open to taking calls with your agent and checking emails daily.
Aspects Outside the Buyer’s Control
Buyers, when you come across these issues, it’s time to take a deep breath and wait. Worry less about these problems, because they’re truly out of your hands!
Issues with title searches, such as undisclosed liens, encumbrances, or boundary disputes can delay the closing process, but they are for the seller to worry about. The seller may require the involvement of attorneys, title companies, or additional documentation to rectify the title issues and provide the necessary assurances for the buyer.
It may take a while, but it’s up to the seller to provide complete documentation. The closing process involves a significant amount of paperwork, including legal documents, financial disclosures, and insurance information. Delays occur if any of these documents are missing, incomplete, or contain errors. The best thing a buyer can do is to make sure that all of their paperwork is perfect!
The Dangers of Impulsive Decision-Making
Buying a home provokes strong emotions, potentially leading to impulsive decision-making. We know it’s romantic, but try not to fall in love at first sight! Consider the long-term practicality or cost of future upgrades to the space. Avoid the negative consequences of jumping into a home you aren’t prepped and ready for!
Staying level-headed is key. Set clear priorities, make informed decisions, and listen to advice from trusted professionals. A calm approach and objective mindset will help you avoid impulsivity’s pitfalls.
All of this is so much easier with a trusted Realtor by your side! That’s where we come in. We’re proud to be an award-winning team of dedicated real estate agents who provide our clients with guidance based on lived experience. Get in touch with our experienced team of professionals to learn more about buying a home.