Common Home Buying Hurdles

Published:
March 16, 2022
Last updated:
April 4, 2022
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Not only is buying a home expensive, but it can be a process that will throw all sorts of hurdles your way. The trick is to get familiar with some of the possible challenges you might face and prepare for how you’ll deal with them.

If you’re looking to buy a home in 2022, you should be aware of some of the challenges that are likely to present themselves. In this article, we’ll discuss a few hurdles to look for, along with solutions to these potential issues.

Buying a Home in 2022: It’s a Challenge

Home buying in 2022 requires not just financial strength, but emotional endurance as well. In a perfect world, the process would go on without a hitch, but it’s likely that you’ll encounter some type of obstacle along the way that you’ll have to overcome.

Here are a few common home buying hurdles that might spring up, and how to deal with them.

Down Payments

Homebuyer hopefuls who aren’t well-versed in the world of real estate or mortgages might be under the false impression that a 20% down payment is needed to buy a home. While that amount may be needed to avoid Private Mortgage Insurance (PMI), buyers can put down much less when taking out a home mortgage loan.

The thing is, even a 3.5% down payment (the minimum required for an FHA loan) can still be a tall order given the high prices for homes these days.

For example, 3.5% of $900,000 — the average price of a home in Seattle — is $31,500. Unless you start saving early, it can be tough to come up with that money in liquid form when it comes time to make a down payment on a mortgage.

Luckily, there are some things you can do to come up with a sizeable down payment, including the following:

Ask Your Parents

These days, parents might have to be more involved in the homebuying process of their adult children than in years past considering the soaring prices of real estate these days. Luckily, down payments in the form of a “gift” are permitted.

Different loan types have their own rules about using gift money as a down payment. You may also have to prove where the gift money came from, which can be done by getting your parents to prepare a gift money letter that stipulates that funds are not loaned and are not expected to be repaid.

Tap Into Your Retirement Fund

If you have a 401K, you can use these funds to buy a house by either withdrawing from the account or taking a loan from the account. Keep in mind that the money you can use is limited to your contribution amounts and must be repaid (plus interest) at some point.

Look Into Down Payments Assistance Programs

Every state has its own set of down payment assistance programs available to help homebuyers with mortgages and grants to cut down on the amount needed for a down payment. As long as you qualify, you can get a loan or grant to cover your down payment.

Credit Score

Your credit score is a key factor that lenders consider when determining whether or not to approve your home loan application. Unfortunately, those with a low credit score may have a much harder time getting approved for a mortgage.

While your credit score isn’t the only thing that lenders look at when assessing your ability to hold a mortgage, it plays a big role nonetheless. If your credit score is a little on the low end, there are some things you can do to give it a boost and increase your odds of mortgage approval:

Get a Copy of Your credit Report

The information on your credit card will dictate what your credit score is, but it’s possible for there to be errors on your report that may be unfairly pulling your credit score down. Pull a copy of your report and look for any mistakes. If you find any, have them investigated and rectified right away.

Pay Your Bills on Time

Payment history is the most important factor that influences your credit score. Missed or late payments can have a negative effect on your score, so it’s important that you stay on top of your bills and make sure they’re paid on time every month.

Keep Your Credit Card Expenditures Under 30% of Your Limit

Credit utilization is another important factor that impacts your credit score. The best way to keep your credit utilization under 30% is to pay the full credit card balance every month rather than just paying the minimum.

When you use your card, be sure not to spend any more than 30% of your credit limit. You may also want to call your credit card provider and ask for a credit limit increase to help make it easier to  stay under the 30% threshold.

Don’t Apply For Too Many Loans at the Same Time

Every time you apply for a loan or a credit account, the lender or creditor will pull a copy of your credit report, which is referred to as a “hard inquiry.”

These hard inquiries can cause your credit score to dip temporarily, and the more loans you apply for within a short period of time, the more it will affect your credit score. When you’re applying for a mortgage, wait until well after you’ve been approved before considering applying for any other type of loan.

Competition

The housing market is a seller’s market right now. How can you compete with so many other qualified buyers?

Competing with others who are vying for the same home can make things more challenging for you, but there are ways to navigate a seller’s market and come out a winner.

Get Preapproved

A mortgage pre-approval letter is recommended no matter what the temperature of the market may be, but it’s even more important when the market is hot. Getting pre-approved will show sellers that you’re a serious buyer and are financially qualified and vetted to secure financing.

Be Flexible With the Closing Date

Sellers choose closing dates that align with their plans. For instance, a seller might want a tight closing because the deal on their new home is closing very soon and they don’t want the hassle of a bridge loan.

If possible, try to be flexible when it comes to the closing date. Your flexibility with this specific issue can help you stand out from other bidders.

Waive Any Contingencies

Most buyers include contingencies in offers to protect themselves, such as financing or home inspection contingencies. However, when you’re in the midst of a bidding war, you may have to pull out all the stops to come out the winner, and one way to do that is to make a “clean” offer that’s void of contingencies.

Keep in mind that waiving contingencies could leave you vulnerable to risk, so make sure you’re comfortable with leaving contingencies out of your offer before taking this route.

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Closing Costs

Before you close on a home, you’ll need to come up with a big chunk of money to cover closing costs. This can add up to anywhere from 2% to 5% of the purchase price of a home. The higher the home price, the higher the closing costs, which can include any of the following:

  • Loan origination fees
  • Discount points
  • Legal fees
  • Home ,appraisal fees
  • Title search and insurance fees
  • Property survey fees
  • Recording fees
  • Underwriting fees

If you’re looking for ways to reduce these costs, consider the following:

Ask For Seller Contributions

The seller may be willing to contribute money toward the closing costs, depending on the temperature of the market. That said, sellers may not be as open to making any concessions when competition is high among buyers.

Pick a Month-End Closing Date

Consider choosing a loan closing date that’s as close to the end of the month as possible. This can help reduce any pre-paid costs covered by the seller between mortgage closing and the beginning of the next month.

Shop Around For Title Services

A title search is very important when purchasing a home, as it will help identify any issues with the title before you agree to finalize a purchase. This requires the assistance of a title search and settlement company and costs money. Shop around and compare prices for such services to find a provider that is willing to charge you less.

Selling a Current Home

If you have a home to sell before buying a new one, you might find it difficult to coordinate the two closing dates so you’re either not stuck with two mortgages or aren’t left with having to find a place to stay before you can move into your new home. Either scenario can be tough to handle.

Here are a couple of ways to facilitate the sale of your current home and coincide with the purchase of a new home:

Gauge the Market

Consider the temperature of the housing market before you decide what to do first: list your current home or buy a new home.

You may be able to sell your home quickly if you’re in the middle of a seller’s market. In this case, you might want to start looking for a home to buy first, as competition may be fierce. Once you’ve found a home to buy, you can then put your current home on the market.

If it’s a buyer’s market, on the other hand, it might take you a lot longer to sell, though you may have your pick of the litter when buying. In this case, it might make more sense to list your home first. Your real estate agent will help you decide what move is best in your situation.

Have Your Home Staged

Get your home ready to show to prospective buyers by having it professionally staged. Homes that are staged appropriately are more likely to sell quicker and for more money compared to properties that have not been staged.

Regardless of what the market is currently like, preparing your home to attract the masses of buyers can increase the odds of finding the right buyer and selling within a reasonable amount of time and at a competitive price.

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Why Choose a Sammamish Mortgage?

At Sammamish Mortgage, we can help you get fully preapproved for a mortgage and assist you in overcoming other common home buying hurdles.

Sammamish Mortgage has been in business since 1992, and has assisted many homebuyers in the Pacific Northwest. If you are looking for mortgage financing, we can help you get pre approved. We offer mortgage programs in Colorado, Idaho, Oregon, and Washington.

Contact a loan officer if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.

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