Home Buying Stress During Mortgage Underwriting Process

This article is about Why Mortgage Process Is Biggest Home Buying Stress

The process of buying a home can be both thrilling and nerve-wracking. Home buying stress is particularly pronounced during the mortgage process, which often stands out as the biggest source of anxiety. This stress is typically more intense for first-time home buyers than seasoned homeowners. The process of mortgage lending involves rules and regulations that are constantly changing, which can be daunting even for seasoned buyers. Additionally, the stress can be exacerbated if the home buyer chooses an inexperienced loan officer. Unlike buying a car or other high-ticket items, buying a home involves a complex and detailed process, making home buying stress significantly more pronounced.

Is the Underwriting Process Stressful?

Stress Due To Lender’s Overlays

The home buying process can be extremely stressful, especially the mortgage process with a lender with any lender overlays. The home buying and mortgage process can take anywhere between 30 to 45 days. There can be delays with closings. Things that can cause delays in closings are if the appraisal comes in too low. Or if there are issues with the home inspection. Or if there is a cloud in the title of the home. There are many things that can go wrong during the home buying process. But in general, the issues that arise during the home buying process normally get resolved.

Reasons Of Stress In The Home Buying Process

Everyone has different ways of dealing with stress. Most folks do not purchase many homes in their lifetime. With each home purchase, it is a new process. There are home buyers that get extremely emotional during the home buying process. Some homebuyers cannot take it and end up canceling the purchase contract. They often end up regretting it after they cool off. There are many individuals involved in the home buying process. Click here to buy a home without any stress

Mortgage Professionals Involved In The Home Buying Process

There are many actors in the home buying process:

• buyers
• sellers
• buyer’s realtor
• seller’s realtor
• mortgage team
• insurance agent
• attorneys for both the buyer side and seller side
• appraiser
• home inspector
• third party vendors

Home Sellers

Sellers can get emotional selling the house they have considered their home for many years and where they have raised their kids and family. Sellers can many times become unreasonable when it comes to repairs. If a home appraiser comes back with items that need to be corrected in the home so it meets mortgage lending guidelines, the seller normally fixes it. The same thing goes with a home inspection. Most homebuyers order a home inspection.

There are times when a home inspector will come back with items that have issues or defects. Many times some sellers can be very unreasonable and feel that they are giving the house away and will not spend a dime. Take this attitude with a nervous first-time homebuyer and the end result is not good. Both the sellers and homebuyers need to be open-minded. All parties in a real estate transaction need to work together to make the transaction work.

Low Appraisal Issues

Most homes are priced correctly. But there are times when an appraisal comes in lower than the purchase price.  This can add home buying stress for both the home buyer and the home seller. Low appraisal issues need to get resolved. It needs to be resolved either via an appraisal rebuttal or the seller reducing the sales price to the appraised value. Or re-negotiating the purchase price somewhere in the middle. The home buyer purchasing the home above the appraised value and at the agreed-upon purchase price.

Pre-Approval And Purchase Contract

The home buying process first starts with home buyers getting qualified for a mortgage. The pre-qualification and pre-approval stage of the mortgage process is the most important part of the overall home buying process. A loan officer should never issue a pre-approval letter. All of our pre-approvals at Gustan Cho Associates Mortgage Team are issued by our underwriters. Our underwriters will fully underwrite a borrower’s file and sign off on a pre-approval letter. Home Buying Stress can be avoided by borrowers getting issued an iron-clad pre-approval by a mortgage underwriter.

The Main Reason For Stress During The Mortgage Process

The number one reason for home buying stress and last-minute mortgage loan denial is due to a loan officer not properly qualifying borrowers. A pre-approval is the most important stage in the mortgage approval process. The home buyer needs to complete a 4-page mortgage loan application. The mortgage loan officer runs the credit.

• The home buyer needs to provide the mortgage loan originator documents such as the following:
• two years tax returns
• two years W-2s
• recent paycheck stubs
• 60 days bank statements
• letters of explanations
• other credit and income docs

The mortgage loan originator will then run the mortgage application package through Fannie Mae and/or Freddie Mac Automated Underwriting System. Once it renders an approve/eligible, the loan file needs to get processed and underwritten. The underwriter underwrites the file, the underwriter then issues a pre-approval letter. Home Buyers should never enter in real estate purchase contract without a pre-approval letter signed off by a mortgage underwriter. Connect with us for mortgage process without stress

Real Estate Purchase Contracts

The home buyer then shops for a home with a realtor and enters into a real estate purchase contract. Signing contracts do not have to be stressful. The real estate contract is probably about a dozen pages. Most home buyers get stressed just reviewing it because it is worded in legal terms. To relieve home buying stress, have the realtor go over line item per line item. Have the realtor explain to in layman’s terms what each paragraph means prior to signing it.

Data On Real Estate Purchase Contracts

Basics on what is written on the real estate purchase contract are the following:

• date
• purchase price
• down payment
• contingencies such as appraisal contingencies and home inspection contingencies
• sellers concessions if any
• mortgage contingencies
• closing date

Executed Real Estate Purchase Contract

Once a purchase offer is submitted to the seller, it may be an hour or several days before the seller accepts the contract or comes back with a counteroffer. For buyers buying a short sale home or a foreclosure, it may be weeks before the seller, which oftentimes is a lender, comes back with a counteroffer. This waiting period can be stressful.

Home Buying Stress During The Mortgage Approval Process

After buyers entered into a real estate purchase contract, the mortgage approval process begins. The mortgage approval process does not have to be stressful if the mortgage loan originator collects all data upfront and the mortgage loan application is processed correctly the right way. A good loan processor will ask for every information and documents a mortgage underwriter will condition after the conditional approval. Conditional approval is a loan approval that is valid if the conditions are provided to the underwriter.

If the mortgage processor submits every possible information and does not miss any documents such as the following:

• 2-year tax returns
• 2 years W-2s
• 60 days bank statements
• recent paycheck stubs
• divorce documents if applicable
• bankruptcy documents if applicable
• child support documents if applicable
• other pertinent documents
• letters of explanations
• The more information and the more cooperation borrowers give loan officers initially, the less home buying stress they will have.

Other Stressful Tasks In The Home Buying Process

Scheduling movers, trying to sell furniture, buying new furniture, changing schools for children, and getting familiar with the new community along the mortgage approval process can be part of good home-buying stress:

My advice is to speak to friends and recent family members who recently went through the home buying process and see how they coped with it. Talk With Our Loan Officer for Mortgage Loans

How Often do Mortgages Fall Through During Underwriting?

Mortgages can fall through during the underwriting process for various reasons. However, the frequency can vary based on numerous factors, including the borrower’s financial situation, the lender’s requirements, and market conditions. Generally, it’s estimated that about 10-15% of mortgage applications are denied during underwriting.

Here are some common reasons why mortgages fall through during this stage:

1. Credit Issues: Changes in the borrower’s credit score, such as new debt or missed payments, can lead to a denial.
2. Income Verification Problems: The loan might be denied if the borrower cannot adequately verify their income or if there are significant discrepancies in the provided documentation.
3. Employment Changes: A borrower’s employment status change, such as switching jobs or becoming unemployed, can negatively impact the underwriting decision.
4. Appraisal Issues: If the property appraisal is lower than the purchase price, it can affect the loan-to-value ratio, potentially leading to a denial.
5. Debt-to-income Ratio: The loan may be denied if the borrower’s debt-to-income ratio exceeds the lender’s guidelines.
6. Insufficient Funds: If the borrower needs more funds for the down payment, closing costs, or reserves, the mortgage application might fall through.
7. Property Problems: Issues with the property, such as title problems or failed inspections, can also lead to a denial.

While these factors contribute to the frequency of mortgage applications falling through during underwriting, many borrowers successfully navigate the process by ensuring their financial documents are in order, maintaining stable employment, and avoiding significant financial changes during the application period.

FAQs: Home Buying Stress During Mortgage Underwriting Process

• Why is the mortgage process often the biggest source of home buying stress? Due to its complexity and the high stakes involved, the mortgage process is a significant source of home buying stress. This stress is especially intense for first-time home buyers. The ever-changing rules and regulations in mortgage lending add to the anxiety, and working with an inexperienced loan officer can exacerbate the situation. Unlike other high-ticket purchases, buying a home involves a detailed and complex process, making it significantly more stressful.
• Is the underwriting process stressful? Yes, the underwriting process can be very stressful for many borrowers. Factors contributing to this stress include the extensive documentation required, detailed scrutiny of financial information, and the unpredictability of the process. Borrowers must gather various financial documents, which can be time-consuming and overwhelming. Underwriters often request additional information or clarification, making borrowers feel like their finances are under a microscope. The uncertainty and high stakes involved, including the potential impact on major life decisions, add to the pressure.
• What should I avoid during the mortgage underwriting to reduce home buying stress? To minimize home buying stress during the mortgage underwriting process, avoid making major financial changes, such as large purchases or changing jobs, as these can affect your debt-to-income ratio. Avoid applying for additional credit or initiating new credit accounts, as this may cause a decrease in your credit score. Pay all current bills on schedule to avoid harming your credit rating. If you need to move large sums of money between accounts, ensure it is well-documented. Avoid closing existing credit accounts and promptly respond to requests from your lender or underwriter for additional information. Do not co-sign loans for others, as this adds to your financial liabilities.
• Can a mortgage be denied during underwriting? A mortgage can be denied during the underwriting process. Common reasons for denial include credit issues, income verification problems, employment changes, high debt-to-income ratios, insufficient funds for the down payment or closing costs, and property appraisal issues. Property problems like title issues, failed inspections, and undisclosed financial information can also lead to a denial. Maintaining stable employment, managing credit responsibly, and ensuring accurate documentation can help avoid these pitfalls.
• What causes stress due to lender’s overlays during the home buying process? The home buying can be extremely stressful, especially when dealing with lender overlays. Typically taking 30 to 45 days, the process can face delays due to low appraisals, home inspection issues, or title problems. Despite these potential issues, most problems during the home-buying process get resolved eventually.
• What are common reasons for stress in the home buying process? Common reasons for stress in home buying include dealing with numerous individuals, such as realtors, loan officers, appraisers, and inspectors. Sellers can also add stress, especially if they are emotionally attached to the home or unwilling to make necessary repairs. Low appraisal issues and complex real estate purchase contracts can increase stress levels.
• How often do mortgages fall through during underwriting? Mortgages can fall through during the underwriting process, with an estimated 10-15% of applications being denied. Common reasons include credit issues, income verification problems, employment changes, appraisal issues, high debt-to-income ratios, insufficient funds, and property problems. Ensuring your financial documents are in order, maintaining stable employment, and avoiding significant financial changes can improve your chances of successfully navigating the underwriting process.

If you have more specific questions about Home Buying Stress During Mortgage Underwriting Process or you need to qualify for loans with a lender with no overlays, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

This blog about Home Buying Stress During Mortgage Underwriting Process was updated on May 20th, 2024.