How To Avoid Mortgage Approval Delays When Buying A Home

Buying a home is a stressful, lengthy process. It takes time to make sure everything is processing correctly, and sometimes the steps feel tedious. Whether you’re a first-time buyer or you’ve experienced the process before, it’s important to watch out for the most common pitfalls. 

 

Making a wrong move during the process could cause delays, or worse, you’ll miss out on the opportunity altogether. It can take anywhere from 30 to 60 days to get final approval on your mortgage depending on the time of year. A mistake could set you back weeks or even months. Here’s how to avoid mortgage approval delays when buying a home. 

 

 

1. Give Accurate Details on Your Application

The most common mistake is to fail to provide accurate, clear details on your initial and follow-up applications. Your lender needs to review your personal information, employment history, and income. This is a time-consuming process, so when information isn’t presented correctly or it’s forgotten entirely, this slows down the entire process. 

 

Make sure to fill out forms carefully. Always answer every single question. If you have any questions, talk to your lender to make sure you’re filling out your forms correctly the first time. Most importantly, never lie on your mortgage application. While it might seem minor to stretch your income or employment history to seem like a better candidate, these numbers will be verified. Just be truthful and upfront about your situation from the start to avoid issues. 

 

 

2. Provide Proper Documentation

As you’ll quickly learn, applying for a mortgage means you need a lot of paperwork. You need to document things like pay stubs, tax returns, W-2s, financial statements, asset accounts, home insurance coverage, and much more. If you’re missing even one of these things, you’ll need to provide it as soon as possible. 

 

If you fail to document something that shows up with a credit or employment check, you’ll need to provide even more documentation. While this might not be a big hassle, it will certainly slow down the process.  

 

 

3. Stoping Making Major Purchases

If you’re new to the home buying process, you might not understand why it’s so vital to avoid making any major purchases or opening any new credit cards during the process. When you’re pre-approved for a loan, this loan is based on your current financial situation and credit. Changing this in any way will jeopardize the closing and funding of your new property. 

 

In the same sense, don’t apply for any new lines of credit. This is true even if you’re preapproved. Once again, applying for credit changes your credit profile, and it could risk your loan process. It’s essential you keep your finances as stable as possible between pre-approval and closing. 

 

 

4. Don’t Make Unusual Deposits

Finally, you don’t want anything unusual happening in your bank accounts. This is especially true for unusually large deposits or withdrawals. The issue here is that you often need to provide documentation and sourcing for this additional funding. In many states, depending on your loan type, family gifts and other forms of cash gifts aren’t allowed to be put towards down-payments. 

 

When in doubt, it’s best to talk to your underwriter. Reporting these types of activities early and upfront will help you fight any delays. It’s safe to mention anything that isn’t part of your normal income or spending so your underwriter is able to make light of it efficiently. 

 

Buying a home is often confusing and time-consuming. To make sure you move through the process as quickly as possible, make sure to avoid these mistakes above. All of these can result in a delay in the home buying process which pushes you further from moving day.  

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How Much Do You Save with Lower FHA Annual Mortgage Insurance Premiums?

Making home ownerships more accessible and sustainable is a major goal of the Federal Housing Administration (FHA). To support with this goal the FHA has lowered annual mortgage insurance by 0.5% down to 0.8%. This could look like if you gathered a $175,000 home loan with less than 5% down then the reduction will end up saving you $818 per year or $3,932 over five years. This is huge news for potential homeowners who were on the edge of going for their dream home.

 

 

What’s An Annual Mortgage?

FHA annual mortgage premiums are paid in 12 monthly installments every year, and are paid on top of principal, interest and insurance. For new FHA loans, they last for the entire life of the loan, regardless of whether you have more than 20 percent equity in your home.

 

 

How Much Do You Save?

The announced changes will take the annual MIP from 1.35 percent to 0.85 percent for loans with less than 5 percent down, and from 1.30 percent to 0.8 percent for loans with more than 5 percent down. 

 

Savings by the year on a 30 year mortgage at $175k

 

 

What Does This Mean?

This means that now first time home buyers have the chance to take their first steps in owning a home. It doesn’t mean that it’s going to be a walk in the park but now it might make the leap more bearable for lower income families. This is also great news for the real estate economy since more homes sold equals money. 

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Can High-End Amenities Make It Harder For Your Home To Sell?

If you are thinking about adding a high-end amenity to your home, think twice.  Consider how the amenity will affect your home’s eventual selling price before plunking down your hard-earned cash.  Your focus is understandably centered on adding something nice to your living space and enjoying the moment.  However, adding several high-end amenities has the potential to backfire as they can make it challenging to sell your home.

 

 

Consider the Impact of Costly Home Amenities Before the Time Comes to Sell

It is awfully tempting to add an enormous master closet, a hot tub, heated bathroom flooring, fancy audio-video systems and other niceties to your living space.  Add such niceties and everything will likely be fine and dandy until the time comes to sell.  There is a good chance these costly amenities will make it difficult to sell your home at the price you expect.  

 

Millennial home-seekers are especially hesitant to fork over their savings for a home laden with fancy features.  Today’s home-seekers are more interested in making the most of their money rather than living large with elaborate home features.  Some home amenities dramatically decrease in value after installation.  Depending on the nuances of your local real estate market, you might find it challenging to recoup a substantial portion of the money you spent for these home amenities.

 

 

Choose Your Home Amenities Wisely

Certain home amenities provide a significant return on investment while others provide minimal return.  The question begs: what types of features are solid investments?  Most homeowners find spending for a large master closet or a hot tub provides an excellent return on investment.   Alternatively, adding a fancy water feature to your yard or paying for a themed entryway to your property could actually decrease your home’s selling price.  People are more concerned with comfort and space than unique aesthetics.  

 

If you dislike the idea of investing in your bathroom, consider adding a massive walk-in closet to your master bedroom.  People spend an abundance of time in bed so investing in this space will make your home that much more attractive to prospective buyers.  This is precisely why homes with a hot tub, spacious bathroom and/or heated floors tend to sell quickly.  More importantly, homes with these amenities have the potential to spark a bidding war that elevates your home’s selling price higher and higher. 

 

 

What About Amenities Beyond Hot Tubs, Heated Floors and Master Closets?

Spend for high-end audio-video systems and you will certainly be thoroughly entertained.  Unfortunately, this type of home amenity does not hold its value like other niceties.  A/V technology is dynamic, meaning it is constantly changing.  In other words, the entertainment technology you add to your home today will have minimal value across posterity.  

 

Plenty of homeowners question whether adding an inground swimming pool is worth the money.  Pools are an attractive home amenity, especially in areas with abundant sunshine.  However, pools have the potential to become money pits.  Pools are expensive to maintain, sometimes require costly repairs and even pose a danger to youngsters.  So don’t assume adding an inground swimming pool to your property will add that much more to the property’s selling price.  The little-known truth is plenty of home-seekers have no interest in a pool.  Some consider taking care of this amenity to be a significant burden.  Do your research, choose your amenities wisely and you will get fair value when selling your home. 

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What To Do If your Home Purchase Appraisal Comes Up Short

Be prepared to make some changes. Your home is collateral for your mortgage so that means if you can not be approved for a loan without an appraisal. It’s never guaranteed an appraisal will come in at your contract price. When your appraisal comes up short your loan options will change. Let’s get into what to do once this happens.

 

 

How Your Loan Is Affected

The lenders will extend a loan depending on your contract price or the home’s appraised value. It’s important to know this because if the appraisal comes in lower than the price you agreed to then you will have two options: Increase your downpayment or increase your monthly income. What can you do next?

 

Increasing Your Down Payment 

You extend an offer of $225,000 for a new home. Let’s say your future home is appraised for $200,000. Without paying your mortgage you can only increase your loan up to 80%, which would end up being $160,000. That means your down payment will have to be $65,000 instead of $40,000.

 

 

 

You and your family will have to decide that if that $25,000 is something you can afford to do. If you decide to move forward then the lender will determine if you have the resources after closing to qualify for the loan. An added bonus of paying more on the downpayment means that your monthly payments will also be lower. 

 

Another option is to keep the same down payment amount and add mortgage insurance. If you are struggling this option may be the best choice. 

 

 

Disputing Low Appraisals

If you can’t get an appraisal to the level that you’d like then you can work with your real estate agent and lender. Together you can all figure out if the appraisal included all relevant information that could affect the price. These factors can include location, age, size, and condition of the sold homes being compared to the property you’re buying and how recently the other homes have sold for.

 

After consulting with each other your lender and agent will determine if the dispute is worth pursuing. After agreeing they will write up a case for dispute and present it to the bank’s appraisal department. Federal appraisal regulations will make the dispute a long process so make sure your contract allows time for such a dispute. If you are approved then you can go back to your original deal structure

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Ways To Save For A Down Payment For Buying A Home

Saving for a down payment is a big step when you are buying a home. Although some types of loans like VA, FHA, and USDA only require a small down payment or no down payment at all, it is not always the best solution. Not everyone qualifies for a low-to-no down payment loan and putting more money down could save you money in the long run, with fewer interests and no private mortgage insurance (PMI) necessary.

However, saving enough money to put 10%, 20% or more to buy a house can feel like a daunting task. This article will help you figure out which is the best way for you to start saving for a down payment. 

 

1. Set up an automatic direct deposit into a saving account

You cannot spend money that is not in your account. If your budget allows (and if you are planning on buying a house, it probably should), set up a direct deposit from your spending to a dedicated saving account for a set amount of money out of your paycheck. 

 

2. Cut off some of your expenses.

While you are in the process of saving to buy a house, it is a good idea to remove any unnecessary expenses out of your budget and put the money you would spend towards your down payment instead. Postpone holidays, cook at home instead of ordering take out or eating out, let go of your drive-thru coffee habit, cancel subscriptions you are not interested in anymore, cancel cable to use cheaper streaming alternatives, etc. These small amounts will quickly add up. 

 

 

3. Get a second job

If possible, join the nearly 4 in 10 Americans that have a side hustle and put that additional income towards your down payment. From driving for rideshare apps to watching children from your home, moonlighting as a freelancer or working in retail on the weekends, you can probably find a way that suits your skills and schedule to add up to your income. 

 

4. Reduce your debt

High-interest credit cards can put a damper on any budget. Whether it was a string of bad financial decisions or a rough patch that put you into that situation, it is a good idea to tackle your debt when you are saving for a down payment. Reducing your debt-to-income ratio will also help you when you apply for a loan. As you lower your debt, either by paying off your credit cards or consolidating your debt, put the money, you will save on monthly payments toward your down payment.

 

 

5. Get money out of your retirement plan.

Depending on your situation, you might be able to pull out some money from your 401(k), 403(b) or IRA retirement account to put it towards your down payment. However, there can be some severe repercussions if you lose your job or do not repay these loans, so you need to take an honest look at your overall financial situation if you make that decision. 

 

6. Investigate down payment assistance programs

Depending on your financial situation, your location, your personal history and the type of property you are interested in, you might qualify for a down payment assistance grant or program. Many of them are backed by government institutions like the Department of Housing and Urban Development (HUD).  Ask your mortgage broker or financial advisor if he or she has any knowledge of grants or programs you might qualify for. 

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Questions To Ask Your Agent Before Listing Your Home

Selling a home is that much easier with the assistance of an experienced real estate agent.  Do not hire any old agent.  The professional you select should meet your unique criteria and provide acceptable answers to the questions detailed below.  Here is exactly what you should ask your agent prior to listing your home.

 

 

Thinking About Listing Your Home? Ask the Real Estate Agent how Long the Process Will Take

Though no agent will be able to put a specific end-date on the sale, this professional should provide a general idea of the length of time necessary to sell the house.  On average, most homes sell after two months on the market.  If the agent you are considering cannot commit to a general timetable, move on to an agent willing to give an estimation of how long it will take to sell the house.

 

 

Are you properly credentialed to list and sell my home?

At a bare minimum, the real estate agent must have a state license.  This professional should also be a member of your area’s real estate trade association.  Otherwise, your agent will not have access to those uber-important multiple listing services.  This service is necessary to ensure your home is listed for maximum exposure.  Some home-sellers insist on hiring an agent who is a member of the National Association of Realtors that mandates continued training as well as an abidance to a specific code of real estate ethics.

 

 

Have you sold any homes in this neighborhood before?

Ideally, the agent will specialize in your neighborhood.  Tap into the expertise of a savvy and experienced agent and this professional will be aware of pending developments as well as businesses and amenities in the area that have the potential to impact your home’s value.  If the agent has not sold homes in your neighborhood or the general area, you run the risk that the agent will suggest an unnecessarily low listing price or fail to present the home in a manner conducive to lofty offers.  Furthermore, it will help if the real estate agent can sell the entire neighborhood as opposed to just your home so prospective buyers are that much more interested in your property.  

 

 

How much will it cost to sell my home?

Find out about the costs that will be paid upfront, be it closing fees, the broker’s commission or other costs.  This way, you can budget ahead of time to ensure you are not slapped with surprise fees that stretch your finances thin.

 

 

How do you plan on communicating with me and other relevant parties?

If you prefer texting and your agent enjoys time-consuming phone calls, the two of you are somewhat of a mismatch.  Others prefer the personal nature of phone calls as opposed to impersonal emails and text messages.  Find out exactly how the agent in question prefers to communicate as well as the frequency of that communication before making a commitment.

 

 

How many home sales did you close this past year?

Though an agent’s prior sales do not ensure to sell your house fast, he or she should at least have a history of sales success. If the agent’s sales numbers are disappointing, you won’t feel as though this professional is capable of selling your home in a reasonable amount of time.  It will also help to find out the price range of the properties the agent has sold.  This price range will clue you into whether the agent has a history of selling homes similar to yours and understands what home-seekers in your income bracket truly desire in a living space.

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Is Paying Rent Ahead of Time a Good Idea?

Depending on where you live, rent could be a big percentage of your income. Paying rent every month quickly becomes a heavy burden on your budget if you’re not prepared. Because of this, many people choose to pay their rent ahead of time. 

 

However, before you hand over your rent in advance, make sure you know exactly what you’re getting into. Sometimes paying rent in advance has a lot of benefits, but it might not be the best choice depending on your situation. 

 

According to Smart Asset, the average rent in the U.S. for a two-bedroom apartment is $1,207. That’s a lot of money for most people, and it can be overwhelming to your budget to pay so much upfront. Here’s a guide to whether you should pay rent ahead of time.

 

 

When to Pay Rent in Advance

When exactly should you consider paying rent in advance? In general, there are only two circumstances when it makes sense to pay in advance. First, if you live in a competitive area and you need to secure a unit, paying ahead is a good way to make sure you get the unit you want. Offering a month or two of rent upfront might help your potential landlord take you seriously as a candidate. 

 

However, this could also be a rental scam. You need to be vigilant to avoid paying into a fraud. For instance, many “landlords” pretend to own the property and take a deposit or upfront rent to “secure” the unit. Meanwhile, they’re really just running away with your cash. 

 

Always research the property and the landlord to make sure you know exactly whom you’re dealing with. If in doubt, a real estate agent can help you navigate this process professionally and safely. Finally, verify that your landlord isn’t foreclosing on the property when they ask for rent upfront. As long as you do your due diligence, paying upfront is a smart way to gain an edge on the local competition. 

 

Finally, the second reason it might be smart to pay rent in advance is to get a discount. Often, landlords offer incentives to pay rent early. This is a win/win since they’re guaranteed their rental income, and you land a discount. Sometimes you’ll get a percentage off rent or a discount, and this might be worth it to you. 

 

 

When to Avoid Paying in Advance

Ultimately, paying in advance does come with risks. An accident or emergency could happen, causing you to move out on short notice. The landlord might decide to sell the property if you’re on a month-to-month lease. A lot of things could happen that are out of your control. When you pay in advance, you risk not being able to get that money back from a problem landlord. 

 

Paying rent so far in advance might also put you in a harmful financial situation. It’s always smart to have enough money saved for emergencies, and if you have to dip into this fund just to secure several months of rent, it might not be worth that risk. 

 

Some landlords simply do not accept prepaid rent since it limits their own situation. First, they’ll need to pay interest on this rent in some states, and this is a tax liability. In addition, they’re less able to have control over their property by raising the rent or selling the apartment in the near future. For these reasons, it’s unlikely to see many landlords accepting long-term rent payments in advance. 

 

 

Pay Rent Safely and Confidently

Ultimately, it’s up to you whether it’s a good move to pay your rent upfront. If you’re trying to secure a unit in a competitive area or if you’re eligible for a discount, it might be a good idea. However, beware of common rental scams to make sure you’re safe with your money.

 

Paying rent upfront puts you in a situation where you might not see that money again. You want to do your research to ensure your landlord is trustworthy and reputable. As long as you’re careful, paying rent in advance could be a good way to gain stability while renting. 

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