Buying a home is a dream for many, but the process can often seem daunting, especially when it comes to securing approval for a mortgage. As a seasoned real estate agent, I’ve encountered countless questions from prospective homebuyers, and one of the most frequent concerns is about the real estate approval challenges. In this blog post, we will explore some common challenges buyers face when trying to get approved for a mortgage and provide practical solutions to overcome these hurdles.
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Yes, I’ve heard that many times.
Since I started in Real Estate, I’ve received thousands of questions, and believe it or not, this is one of the most common ones. But, of course, the conversation doesn’t start there, it goes something like this:
“Look, I want to buy a house in Miami”.
“Perfect, would you like to buy it in cash or finance it?”
(Loud laughter) “How am I going to buy it in cash? Have you seen those prices?”
“I understand, it’s true that prices have gone up a lot. But do you already have a bank pre-approval, or would you like me to recommend a lender?”
“No, no, I don’t have anything. Can you give me the money?”
(Nervous laughter) “I wish, but no. I can recommend one of my trusted lenders; they have helped many of my clients”.
“Yes, send me to one of them. What do they need? My ID and that’s it?”
“Well, it’s a bit more complicated than that. They will need the last two years of tax returns, the last two months of bank statements, and pay stubs. They will also check your credit to see if you qualify for financing. I know it seems like a lot, but we usually have a response within 24 hours”.
And that’s when he drop the line
“To finance a house, do I need all that!? But my cousin bought a house 25 years ago and did it in a week!”
“Well, things are a bit different than years ago. After 2008, everything changed; now they ask for more documents to be sure they can give you the loan”.
“But what’s the matter? Don’t they trust me? I have a credit score of 800, that should be enough! You guys want to complicate everything! That’s how this country is going!”
And suddenly, silence.
He never answered the phone again. Believe me, I tried to talk to him again and maybe explain the process a bit more, but there was no response.
And that has happened to me many times. People think things are like they were years ago when they gave you $500,000 just for having a job (and sometimes not even that). But as we all know, the consequences were the 2007 crisis.
From there, banks had to get more serious with clients.
But that wasn’t the only case.
Financing is very simple when you have a W2 or 1099 and do your taxes correctly every year, but what about people who don’t report what they really earn? The following conversation was somewhat surreal:
“And do you do your taxes every year?”
“Yes, of course”.
“Perfect. If it’s not too much to ask, how much did you declare this year?”
“Well, I declared about $30,000”.
“That’s very little. Unfortunately, earning that, they might not approve you. Maybe you want to do it with your wife or a family member?”
“No, but I earn much more”.
“Ah, well. If that’s the case, there’s a way to get approval by bank statements, where you’ll show what you earn in a year.”
“But does it have to be in the bank account?”
“Yes, the income and expenses need to be reflected. They want to see if you can pay the monthly payments and if you receive money regularly”.
“Well, we have a problem because I have all the money in cash. I don’t trust banks”.
Of course, this case was impossible. The man had a bank account with just enough to make some payments, but he was not willing to put more money in. I don’t know how much he had at home, but he gave me the impression that it was A LOT.
It wouldn’t work as a cash transaction either because the money also needs to be legally in the account. You can’t show up at closing with a suitcase full of bills.
And this brings me to another transaction.
Our client needed $15,000 for closing, which he had in cash. Carefully, the bank officer proposed two ideas.
The first was to put that amount in the bank over three months. That way, the money would be legal, and the bank would accept it for the closing. The only problem was that the closing was in three weeks, and doing this would delay the transaction too much, probably leading the seller to cancel the contract.
The second option was simpler. The money should be gifted by someone. This would speed up everything. Instead of three months of waiting, it would take a few days.
The client went with the second option because he really wanted the house. A few days later, a friend sent him the money following the bank officer’s step-by-step instructions.
The next week, the buyer had the money in his account, and the closing could happen just in time.
Most of the time, as you see, the problem is economic, and the previous case would have been resolved much more simply if it had been now.
I usually like to tell stories that happened a long time ago because the solutions are always there. But this case that happened a month ago is important to mention.
Carla had everything necessary to buy the house but lacked cash. She had no one to give it to her, but she really wanted to buy and stop paying rent.
We had talked for months, and she was only $12,000 short of diving into the sea of properties. And suddenly, a light appeared.
Freddie Mac, one of the main mortgage lenders in the United States, launched a 0-Down plan.
I immediately informed Carla, and we quickly talked to the lender who was pre-qualifying her. He promptly got to work and got Carla approved for this program.
It works simply: Carla will receive two loans. The first is for the house price, and the second is for the down payment amount. Since she is a first-time buyer, she will pay a 3.5% down payment, and $15,000 of that down payment will also be financed.
Right now, Carla is under contract and will soon have her first property!
But surprisingly, the problem isn’t always the money.
Let me introduce you to Sebastian.
He had everything necessary to buy, even a very good credit score, but when he sent all his information to get pre-approved, there was a slight problem: he didn’t have enough credit history.
Although it may not seem like it, this is important.
Sebastian only had two credit cards, which he used regularly and paid on time, but the oldest one was only a year and a half old. He never thought that would be a problem since the number that appeared on all the reports was over 730.
So, we got to work, and one of our colleagues, who specializes in credit repair, contacted him.
The work wasn’t simple and took a year for him to get enough history for the bank to give him pre-approval. But after that time, he got it.
As you see, there are hundreds of problems that can stop or delay the decision to buy a property. Therefore, even if you plan to do it in one or two years, I recommend talking to Mi Casa Team to start preparing for the process.
Some people think we charge for advice, but this is false. Mi Casa Team is here to help so that, like all the people we’ve helped, in the future, you’ll send a friend or family member when they need to buy or sell a property.
In summary, buying a house can seem complicated, but with the right preparation and the right team by your side, it is entirely feasible. Don’t let doubts or requirements discourage you. We are here to guide you every step of the way and ensure you get your dream house!
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Our stories are real, but names, addresses or images have been altered for the privacy of our clients.
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