Category Archives: mortgage process

Should homebuyers get approved for a mortgage before home shopping?

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Do you typically encourage your homebuyers to get a mortgage approval before home shopping?

According to Carrie Niess, business analyst at American Financing, most homebuyers are doing it in reverse, finding their dream home and then hoping to get approved for a mortgage to afford that home. “The best thing to do is get an approval 30 to 60 days prior to shopping.  That way any potential issues can be addressed before going under contract, you can determine an appropriate price range for your search, and you’ll have access to a pre-approval letter acknowledging what you’re financially approved for, so your offer can strongly compete against others,” said Niess.

Niess also said it’s imperative for homebuyers to have a “trustworthy” home inspector. “The cost of a detailed home inspection is easily justifiable when considering the cost of defective major structural or mechanical issues. A home is an asset. You should never intentionally owe more than it is worth. Even in aggressive home markets, buyers should not pay over the home’s appraised value. It’s not financially beneficial to be underwater on a home starting day one,” she added.

“We’re not seeing homes on the market for very long, no matter what market you live in. High buyer demand and low home inventory equates to higher pricing , which is great for the seller and economy, but can be discouraging for the buyer. First-time homebuyers can feel particularly overwhelmed having never been through the process before. The good news? Taking the time to get pre-approved with a mortgage lender before talking terms can make even the most inexperienced buyer more attractive to a seller looking to move.”

Niess said homebuyers should make an offer as soon as they find a home they like. She doesn’t believe mortgage rates will be moving too much in the near future.

Across Pennsylvania, millennials are buying, she said. Data from Ellie Mae’s Millennial Tracker shows the majority of young Pennsylvania homebuyers were single and 29, as of the first half of 2017. Most chose conventional loans over alternative products such as FHA loans to fund home purchases. On average, they spent $157,000 to get a home and waited 47 days to close the deal, she stated.

Homebuying, mortgage process stressful for many consumers

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Forty-two percent of homebuyers reported that the homebuying process was stressful, according to NerdWallet’s Home Buyer Reality Report.

Nearly one-third said it was complicated, while 21 percent reported it was intimidating. However, 30 percent described the experience as rewarding, while 41 percent it was manageable. Yet, 49 percent reported they would do something differently if they were homebuying again.

Mortgage applications are still confusing many homebuyers, as 58 percent of homebuyers applied for one. Forty-one percent of homebuyers who did apply said they were not sure of all the options available to them. And 28 percent said they did not feel like a priority to their mortgage professional during the loan process. Overall, 89 percent of applicants were approved for a loan to buy their house.

Among generations, 27 percent of millennials believed their mortgage rate was affordable when they purchased, and 39 percent said the mortgage process was positive. Eighty-nine percent of millennials who applied were approved. However, 11 percent of millennials said that after purchasing their home, they didn’t feel financially secure anymore. More than half (57 percent) said they had regrets in their homebuying experience.

Only a quarter of Generation X members reported a positive experience with the mortgage process, but 91 percent of Gen Xers were approved for one. Twelve percent reported not feeling financially secure after homebuying. Sixty-one percent reported that they would do something differently when homebuying again.

As for baby boomers, 25 percent found the mortgage process stressful, but 42 percent said it was manageable. Sixty-five percent said they believed they were aware of all their options for mortgages during the process. Only 6 percent said they did not feel financially secure after they bought their house, but 38 percent of baby boomers would act differently when homebuying again.