Here, I would like to discuss the two key insights that emerged from our comprehensive research.
Above storyboard is just a simple overview of house buying journey, each of these steps have multiple micro steps and concerns that buyers have to cater to. In the two insights I am gonna focus on finances, loans and the final step before buying the house inspection part.
The entire process hinges on the buyer’s level of preparedness in terms of their financials. It commences with the crucial steps of saving for downpayment and obtaining pre-approval for a mortgage. Obtaining pre approval shows the buyers readiness for buying, it can be obtain one or four moths before starting the journey. However, obtaining pre-approval is not the final task, as sellers may not favor the type of loan or grant a buyer possesses.
Our user interviews shed light on a reality of loan grants available for 1st time house owners. Some sellers harbor reservations towards FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans. FHA is a government loan grant for first-time homebuyers, while VA provides loans to military veterans. FHA offers government-backed loans for first-time homebuyers and VA provides assistance to military veterans; these options, despite offering benefits like low-interest rates and lower down payments up to 3% and as low as 0% for some qualified buyers, aren’t embraced by many sellers. These options are more favorable to buyers due to their stringent house inspection requirements, leading to higher quality purchases
According to Bankrate’s article what is private mortgage insurance, “any mortgage with a down payment of less than 20% of the sale price usually requires private mortgage insurance (PMI)” adds an extra cost for buyers unless waived by the lender.
From the seller’s perspective, however, FHA and VA loans are less preferred as they introduce complexities into the selling process. The more rigorous inspection process can pose challenges for sellers, especially if the house is in poor condition. Sellers may need to make repairs before selling or reduce the selling price, leading to sellers favoring a buyers who waive the inspection. The market also have a perception that FHA borrowers are riskier due to lenient financial requirements by the lenders for the borrowers. This discrepancy often puts sellers and buyers on opposite sides of the negotiation process.
Second insights delve into the process of house inspection, it is the last step before finalizing the deal and signing the deed, plays a pivotal role in determining the physical condition of the property. Buyers learn about the sewage systems, pipes and, other hardware of construction uncovering both positive and negative aspects of the property. In some cases, buyers discover significant issues but grapple with the uncertainty of finding another suitable property because of the cut throat competition in the buyers market. The inspection report becomes a critical factor in the decision-making process, leaving buyers in a dilemma. However, the second insight reveals that some sellers prioritize waiving inspections over receiving more money (in loan insights we learn that sellers prefer receiving cash payments and offen accept the highest bidding). This preference often stems from a sense of desperation among buyers who fear missing out on a property and end up compromising their expectations and dreams. Sellers, too, favor buyers who waive inspections to avoid reducing the price and performing repairs. Despite these preferences, it remains crucial to ensure that homebuyers move into structurally sound properties, underscoring the importance of thorough house inspections. House inspections are in buyers favor and their only right to refuse the purchase and receive fair price options.