Twenty-five percent of homebuyers would rather gain 10 pounds than go through the mortgage process again, according to a survey of 1,000 random homebuyers.
Even more shocking, nearly 13 percent would rather spend 24 hours with the person they dislike most than deal with the financial side of buying a home. I’ve even had a client tell me “getting a loan is like having a financial colonoscopy!”
As real estate agents, we counsel our homebuyers through a very emotional, and often stressful, period. At a recent panel discussion hosted by mortgage lender Eave, Denver-area real estate leaders explored why “homeshopping is clunky and driven by anxiety.”
Rather than see homebuying through the lens of stress, embrace its excitement. So, what is the key to making homebuying more of the latter?
Panelists shared best practices on doing as much legwork ahead of time as possible to manage client expectations and minimize unforeseen obstacles, while affirming the role Realtors play in helping turn buyers’ feelings from stress to joy.
“I’ll be six feet under before Realtors stop being crucial to buying a home,” said Nick Bailey, CEO of Century 21 Real Estate at the panel.
I’ve been in the real estate industry for over 14 years and have been a broker with Kentwood for the past nine years. During my time navigating Denver’s bustling real estate industry, I have learned a few tricks to make the buying and selling process as seamless as possible.
Here are my top five insights to help reduce homebuyer stress:
Step 1: Find the right house
In housing markets where inventory is low, such as Denver or Seattle, the house of your clients’ dreams could see multiple offers after only a few days on the market and, in some cases, just a few hours.
Set expectations, and ensure your client is prepared to move quickly and confidently to close the deal.
The first step is having your client outline their decision-making parameters ahead of time. List their non-negotiable items to evaluate the homes against, before they look at listings and get emotionally involved.
If you begin the search process and you don’t have a clear-cut list of things to evaluate against, you could lose sight of your clients’ important decision-making factors.
Ask your clients to take some time before the house hunting begins — in a clear headspace — to really think about what they’re trying to accomplish in the new home, whether it’s a shorter commute, a big back yard or anything else that’s important to them.
Step 2: Make sure clients know their credit
Mortgage companies pull buyers’ credit scores before pre-qualifying and approving loans. Any demerit from the past seven years on your client’s credit score can increase their interest rates significantly.
It’s important to let your clients know that the scores they see on consumer credit reporting sites such as Credit Karma are typically higher than the scores lenders will use. To get the most accurate picture, it is a good idea to suggest that they pull their credit scores directly from the three bureaus.
Have your clients look for potential inaccuracies in their reports. I’ve seen cases where buyers go into the process incredibly confident in their finances, only to find out that something had been incorrectly reported years ago, or there was a freeze placed on an account that they had forgotten about.
It can take 30 to 60 days to resolve disputes and get them removed from credit reports, so having clients do everything they can to understand their credit report and correct it ahead of time, will minimize any unwanted surprises or delays at the lender’s office.
Step 3: Justifying a unique income situation
Any large sum of income deposited into your client’s account within two months of the approval must be justified through documentation, or it cannot be counted in their net worth. This process exists to identify family loans, or other loans in disguise, as lenders want to ensure that any funds claimed are your client’s and are not loans that need to be paid back to someone else.
For example, if your client’s parents give them $5,000 toward a down payment to celebrate a wedding, they will also have to provide a gifting letter accompanied by their names, date of the gift and a signed summary outlining that no funds are expected to be paid back.
They may also have to provide access to their bank statements to prove where the funds came from. Lenders may also ask your client to justify things like commissions for a salesperson, bonuses or any other unpredictable or passive income from rental properties or investments.
Furthermore, homebuyers with complex income, assets, employment or situations such as entrepreneurs, investors and individuals with asset sales or complex tax returns, can actually find securing a traditional mortgage challenging.
Saro Vasudevan, co-founder of Eave, a fin-tech mortgage company, said, “In today’s markets, the enterprising people who are in truth some of the most creditworthy borrowers are at a disadvantage because traditional underwriters generally don’t fully understand today’s complex financial profiles.”
If your client’s situation falls into any of these categories, make sure they are communicating with their lender up front, as they need to get the necessary documentation together ahead of time. That way, you don’t run the risk of the lender asking for justification at the last minute and scrambling to close on time.
Step 4: Avoid last-minute financial questions
This is where you find the horror stories of stressful closings because the lender starts asking questions at the last minute that indicate a lack of certainty on the amount for which your client is qualified.
To avoid that, work with a lender that can do a full underwrite of your client as a borrower ahead of time, rather than a pre-approval. With a full underwrite, your client can shop with the confidence and certainty of a cash buyer, as they know exactly how much they’ve already been approved for.
A full underwrite before your client makes an offer eliminates all uncertainty around what they can afford. If you’re working with a reliable lender, you can reduce concerns and ensure a smooth closing.
Step 5: Manage emotions
Emotions can affect your client’s decision-making capabilities and may add unnecessary stress. Confidence and certainty are two key pieces to getting your client emotionally ready to buy a home.
First, make sure your clients are clear about how much they can afford to pay as a down payment and each month on their mortgage. Buying needs to be a good decision based on where they want to be financially versus what the industry standards say they can afford.
Then, ensure you work with people you can trust — your lender and any other outside advisers you may want to consult throughout the process.
If your client has confidence and certainty going into the process, you’ll know what they can afford, what they’re looking for, and you’ll be able to do your homework to get them the best home and the best financial deal to accomplish their goals.
In the end, this is your clients’ home, and they know what is best for their situation. Don’t let them lose sight of the fact that buying a home is supposed to be an exciting time, too.
It’s not all about losing sleep and panic attacks. Reducing stress is all in the preparation, so make sure you do your due diligence to ensure they don’t jump in blindly.