Being a home buyer is really tough right now. With so many other buyers to compete with and such little homes to choose from, buying a home can turn into a nightmare.
While a rising real estate market seems healthy for a recovery, a closer look reveals there are a lot of pain among buyers. Higher home prices have come from multiple buyer offers bidding up a regular list price of a home. Now interest rates have creeped up and have also taken a stab at today’s home buyer.
I’m offering some tips and strategies I use with my buyer clients to make sure their offer has the best chance of being selected.
Know How Much to Buy and Your Limit
First thing you need to do is be pre-approved for a loan. This means the lender gathering all your financial statements, running them through their system and determining if you qualify and for how much. You should know exactly what your payments should be, how much down payment you will need, extra funds to close the sale and what is the maximum price you can purchase.
Best Practices for Competitive Offer Price
- Make offers on homes below your maximum qualifying limit
- Discuss a “highest and best” strategy with your agent
- Explore all co-signer or gift fund options before making offers
A contingency is a fail-safe that protects your good faith deposit money while doing your due diligence inspections and financing approved for the home you’re trying to buy.
It is not uncommon in today’s market for a real estate agent to suggest waiving your contingencies to strengthen your offer.
It’s very, very important that you understand the impact and consequences of removing contingencies.Remember that your good faith deposit is at risk if you discover that this is not the home requires more repairs that you expect during the home inspection.
Removing financing contingencies only to find out that the home doesn’t qualify for financing due to health or safety issues discovered during the appraisal is a realistic scenario that you need to protect yourself against.
Best Practices for Competitive Contingencies
- Don’t feel pressured to removed contingencies, they are they to protect you
- Consider reducing contingency period, not removing it
- Make sure you are pre-approved, not pre-qualified for financing before making offer
Do Not Ask Seller to Pay for Closing Costs
If you know you’re going to be short on covering your down payment and all of your closing costs, exhaust all of your assistance options before asking the seller to help.
There are several options that are acceptable to the lender for covering down payment and closing costs.
Gift Funds – You can receive a gift from a blood or marriage relative to help pay closing costs or down payment. If you intend to use gift funds, immediately speak to your lender to make sure that you are getting this gift from an approved source, and that you can provide the appropriate documentation.
Non-Occupying Co-Borrowers – Also known as a co-signer. Co-signers are not allowed with most loan programs. If you have a co-signer that is willing to co-sign on the loan, but will not be living in the home, again, immediately consult your lender as this can add layers of complications to the loan approval process.
Down Payment & Closing Cost Assistance – The State of California offers several assistance programs that are allowed to be used to cover closing costs or down payment.
These programs often have qualifying requirements that are more strict than simply qualifying for the mortgage being used to purchase the home.
Portions of this article are courtesy of www.FindMyWayHome.com