Boy is this a loaded question! Do you have about 15 hours to read this post? Just kidding ?
I will be playing devil’s advocate here because the process is not completely horrible but I will be honest in letting you know the bad. As a home buyer you will be going through a plethora of emotions mostly anxiety. Overall after closing and many years later people tend to forget what they went through in their transaction.
#1 The Home Inspection
After you are under contract with the home that you love and have envisioned putting furniture and decorating it then you come upon the “Home Inspection“. Conducting a home inspection can be a double edged sword on one hand as a home buyer you want to find out what is wrong with the house but on the other hand you don’t want to have a laundry list of items that need to be fixed. Although, it is a good thing that you are finding out now whether you want to live in a money pit you also need to continue to spend $400-$600 for each inspection. At that point your are making the home inspector rich but if you got the money then just go for it.
#2 The Loan
When you get a loan for a home the experience can be good or it can be bad. Make sure you know your mortgage banker and make sure he/she comes well recommended. Some mortgage banker’s have tons of knowledge on how to get things done and some don’t. Several things can go wrong that I have experienced such as
A. VOE- Verification of Employment – Lenders will need to get a verification of employment from your employer and the document contains questions as to how much is your salary or hourly pay, length of work history, hours worked etc. If you have a reduction in hours or pay – you will be in trouble to try and continue the transaction. A reduction of pay or hours will reduce your initial income that you put on your mortgage application. It is crucial to have this information correct because once you have a small change in pay or hours it will affect you getting the loan and this can be very stressful on you as a home buyer. However if you have a pay increase or over-time hours this can be a good thing. One other thing to keep in mind is that the HR staff where you work might not be familiar with the paperwork and might end up putting less hours or incorrect information. This happened to a past client of mine and we almost didn’t close because the HR person put in less hours then what she actually made.
B. Underwriting – According to wiki underwriting is s the process a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable. I look at in lamest terms as a department of bank supervisors going over your documentation with a fine tooth comb. Piggy backing on section A. underwriting concerns employment history. Do unexplained gaps exist in the borrower’s employment history? Have you changed jobs within the past 2 years and the new position does not fall within the same line of work? Are a temporary worker and not yet made permanent? Is your company likely to layoff employees in the near future? Recently an underwriter informed a borrower that her loan would be rejected if she could not get a letter from her employer. This can also be super frustrating, be ready to be questioned several times by your lender or their processor for these answers.
C. The appraisal – an expert estimate of the value of a property. A major concern for you as a home buyer is if something goes wrong with the appraisal. Either the assessment of value might result in a low appraisal or the underwriter might call for a review appraisal by another appraiser just prior to approval. There are ways to contest a low appraisal, but most of the time the appraiser will win. If you as the the buyer don’t have the money to pay the difference and the seller refuses to lower the price, the pending sale might cancel. This one is the one of the hardest pain points for a homebuyer. I would say that it sucks because everyone in the transaction and so much time has been invested.
When you are under contract there is an attorney review period typically in Chicago it is 5 business days and can be extended. During this period the attorney’s does their homework to find out if there are any liens on the property or if there is something suspicious on the contract or simply if the attorney disapproves of the contract. The lawyer will approve the contract if certain changes are made. The rest of the letter details the language of the changes. This can sometimes be stressful if the attorney finds something majorly wrong with the paperwork of course it will save you thousands of dollars but the time that you have invested in finding a home and getting excited can take a toll.
Ultimately buying a home is not like a buying something off the shelf of a store you will experience many different emotions and sometimes will want to cancel. If you have great people working for you the transition can be a great experience. What do you think?