Despite the never-ending events of 2020, the housing market has overcome the worst to remain healthy. As of September of this year, existing-home sales jumped nearly 10 percent over the previous quarter. Whether this increase continues or the bubble bursts will depend on many factors.
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Be Prepared
Until those issues are determined, this is a prime moment to purchase a home. To do that, you need a good deal of information ahead of time. Not only for your personal sense of peace but also to keep the other party calm during the process.
Especially the mortgage underwriter. When they don’t have all of the necessary information, then the process is delayed. It may come to the point that the seller denies the buyer’s offer due to the lack of information.
Thus, fobbing off on information gathering results cannot happen. To keep everyone calm, here are three home buyer resources to make underwriting easier.
Check Your Finances
One of the first things the underwriter does is checks the buyer’s finances. They review their current income and debt. They run multiple credit reports to determine if the purchaser has any outstanding debts or has declared bankruptcy. The underwriter also digs into legal records to see if any debts were sent to court for payment.
All of this means the buyer’s profit and loss statements have to be clean. If their debt-to-income ratio is too high, then the underwriter might hesitate in granting the mortgage.
Thus, the buyer must pay down their outstanding debts. They also need to go over their credit report and flag items that are incorrect. They can move on to the next step once they’ve addressed everything possible.
Loan Pre-Approval
A pre-approval doesn’t mean the buyer automatically gets a home loan. Rather, it’s a statement of how much they can afford given their income-to-debt ratio. This number helps all parties determine if the property is within their investment limits.
Should the seller accept a buyer’s proposal, it doesn’t mean they need to select the financial institution that provided the pre-approval. Instead, they can shop around for a loan that offers the lowest interest rates.
Furthermore, they can look into specialized loans. For instance, California Veterans can apply for CalVet Loans. These tend to have lower interest rates than conventional mortgages and incentives for minimal or no down payments. Therefore, the buyer can look at a wider variety of homes from places like SoCal VA Homes.
Home Inspection
One of the tools a mortgage underwriter applies to their review is an appraisal of the property the buyer wants. They utilize a large checklist to determine if the home’s value is within the realm of what the seller proposed.
A resource the buyer uses to get an idea of the value is a home inspection. Most states consider this a mandatory step in the purchase process when dealing with realtors and underwriters. It’s a way for the buyer to receive a detailed report on the home’s plusses and minuses.
For the most part, the items discovered by the home inspector are minor. However, there are times when they find issues like asbestos, termite nests, or mold. In those cases, the buyer needs to work with the seller’s representatives. They can either reduce the price to allow for these repairs or make the fixes on their own.
Significant damage also changes the appraiser’s estimate of the home’s value. If the issues are severe, they might lower the price to the point that it’s not worth selling.
The purchase of a home is a major moment in someone’s life. Whether the buyer is a first-time owner or someone interested in an upgrade/downgrade, preparation for mortgage underwriting is critical. It can’t be done in only a few hours. It takes several weeks to compile all of the necessary details.
Thus, homebuyers must collect their financial data well ahead of time to avoid any surprises. At the same time, they need to prove a pre-approved loan from a financial institution, preferably one who focuses on mortgages and other secured loans.
Overall, the provided resources should keep anxieties down on the buyer and seller sides. As a result, the underwriting process will move smoothly toward successful completion.
