How To Have A "Zen-Like" Transaction
What is the key to making homebuying exciting rather than stressful? 25% of homebuyers would rather gain ten pounds than go through the mortgage process. Even more shocking, nearly 13% would rather spend 24 hours with the person they dislike most than deal with the financial side of buying a home. I’ve even had a client tell me “getting a loan is like having a financial colonoscopy!”
As REALTORS®, we counsel our homebuyers through a very emotional, and often stressful, period. At a recent real estate panel, real estate leaders explored why “homeshopping is clunky and driven by anxiety.”
Rather than see homebuying through the lens of stress, embrace its excitement. So, what is the key to making homebuying more of the latter?
Panelists shared best practices on doing as much legwork ahead of time as possible to manage buyer’s expectations and minimize unforeseen obstacles, while affirming the role REALTORS® play in helping turn buyers feelings from stress to joy.
“I’ll be six feet under before REALTORS® stop being crucial to buying a home,” said Nick Bailey, CEO of CENTURY 21 Real Estate at the panel.
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I’ve been in the real estate industry as a Broker with CENTURY 21 for the past 21 years, and a licensed REALTOR® for a total of 34 years. During my time navigating HRM’s bustling real estate industry, I have learned a few tricks to make the buying and selling process as seamless as possible.
Here are my top 5 insights to help reduce your homebuyer stress:
Step 1: Find the Right House
In housing markets like HRM where inventory is low, the house of your dreams could see multiple offers after only a few days on the market, and in some cases, just a few hours. Set your expectations, and be prepared to move quickly and confidently to close the deal.
The first step is for you to outline your decision-making parameters ahead of time. List your non-negotiable items to evaluate the homes against, before you look at listings and get emotionally involved. If you begin the search process and you don’t have a clear-cut list of things to evaluate against, you could lose sight of your important decision-making factors. Please…take some time before the house hunting begins — in a clear headspace — to really think about what you’re trying to accomplish in the new home, whether it’s a shorter commute, a big back yard or anything else that’s important to you!
Step 2: Make Sure you know your credit score
Mortgage companies pull buyers’ credit scores before pre-qualifying and approving loans. Any demerit from the past seven years on your credit score can increase your interest rates & options significantly.
Online “Pre-Approval” apps are especially problematic for Buyers, eg. RBC, BMO, TD. Despite what the app tells you, you are not really “Pre-Approved”, you only fit the basic numerical ratios to apply.
Another thing to keep in mind is that the score you see on consumer credit reporting sites are typically higher than the scores lenders will actually use.
IF YOU PLAN TO SHOP FOR A MORTGAGE - Make sure the lender or Mortgage Broker does not “pull your credit bureau”, as that act alone, repeated for every place you shop, could disqualify you as a “CREDIT SEEKER".
Look for potential inaccuracies in your report. I’ve seen cases where buyers go into the process incredibly confident in their finances, only to find out that something had been incorrectly reported years ago, or there was a freeze placed on an account that they had forgotten about.
It can take 30 to 60, even 90 days to resolve disputes and get them removed from credit reports, so making sure you do everything you can to understand your credit report and correct any mistakes ahead of time will minimize unwanted surprises or delays at the lender’s office.
And please…please…please...
DO NOT MAKE ANY LARGE TICKET PURCHASES UNTIL AFTER YOUR HOUSE HAS CLOSED.
If you do, IT MAY NOT ACTUALLY CLOSE. Your mortgage approval is actually subject to the following, or similar, phrase - “The mortgage lender reserves the right to rescind this approval if, in their opinion, any significant changes have occurred since the initial approval and the projected closing date of the transaction”.
3. Justifying a Unique Income Situation
Any large sum of income deposited into your account within two months of the approval must be justified through documentation, or it cannot be counted in your net worth. This process exists to identify family loans, or other loans in disguise, as lenders want to ensure that any funds claimed are yours, not loans that need to be paid back to someone else. For example, if your parents give you $5,000 toward a down payment to celebrate a wedding, you will also have to provide a gifting letter accompanied by your name, date of the gift and a signed summary outlining that no funds are expected to be paid back.
You may also have to provide access to your bank statements to prove where the funds came from. Lenders may also ask you to justify things like commissions for a salesperson, bonuses or any other unpredictable or passive income from rental properties or investments.
Furthermore, homebuyers with complex income, assets, employment or situations such as entrepreneurs, investors and individuals with asset sales or complex tax returns, can actually find securing a traditional mortgage challenging. Saro Vasudevan, co-founder of Eave, a fin-tech mortgage company, said, “In today’s markets, the enterprising people who are in truth some of the most creditworthy borrowers are at a disadvantage because traditional underwriters generally don’t fully understand today’s complex financial profiles.” If your situation falls into any of these categories, make sure you are communicating with their lender up front, as you need to get the necessary documentation together ahead of time. That way, you don’t run the risk of the lender asking for justification at the last minute and scrambling to close on time.
Step 4: Avoid Last Minute Financial Questions
This is where you find the horror stories of stressful closings because the lender starts asking questions at the last minute that indicate a lack of certainty on the amount for which you are qualified. To avoid this, work with a lender that can do a full underwrite of you, as a borrower ahead of time, rather than a pre-approval. With a full underwrite, you can shop with the confidence and certainty of a cash buyer, as you know exactly how much you've already been approved for.
A full underwrite before you make an offer eliminates all uncertainty around what you can afford. If you’re working with a reliable lender, you can reduce concerns and ensure a smooth closing.
Step 5: Manage Emotions
Emotions can affect your decision-making capabilities and may add unnecessary stress. Confidence and certainty are two key pieces to getting you emotionally ready to buy a home.
First, make sure you are clear about how much you can afford to pay as a down payment and each month on your mortgage. Buying needs to be a good decision based on where you want to be financially versus what the industry standards say you can afford.
Then, ensure you work with people who you, or your REALTOR®, trusts — your lender and any other outside advisors you may want to consult throughout the process.
If you have confidence and certainty going into the process, you’ll know what you can afford and what you’re looking for, and we’ll be able to do our homework to find the best home and the best financial deal to accomplish your goals.
In the end, this is going to be your home, and you know what is best for your situation. Don’t lose sight of the fact that buying a home is supposed to be an exciting time, too!
It’s not all about losing sleep and panic attacks. Reducing stress is all in the preparation, so we will make sure we do our due diligence to ensure you don’t jump in blindly.
Start searching for your dream home now.
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