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Applying for mortgage preapproval before you shop for homes can make your offer more competitive.
- A good Realtor will communicate with sellers and take your finances into consideration.
- You can offer more than the asking price and waive contingencies, but make sure you're OK with it.
- This article is part of "The Road to Home" series focused on helping first-time homebuyers navigate the daunting and exhilarating process of purchasing a home.
Today's real-estate market is competitive, and there are often multiple offers on one home. This means you may need to take action to make your offer stand out. Here are a few options for putting together a successful offer.
Get preapproved for a mortgage
Once you're ready to shop for homes, apply for preapproval with at least one mortgage lender. In a preapproval, the lender tells you which types of loans you could be eligible to take out, how much you may be approved to borrow, and what your rate could be. Once you've been preapproved, your rate is typically locked in for 60 or 90 days.
It's useful to apply for preapproval before you find the home you want to buy. You'll know how much you're approved to borrow, which will give you a good idea of what you can afford.
Having a preapproval letter in hand when you make an offer shows the seller that you're a serious buyer. They'll also see that you are financially stable enough to be preapproved for a mortgage by a lender. A preapproval letter could give you a leg up over other prospective buyers who don't have letters yet.
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Use a Realtor
As you search for real-estate agents, look for candidates who are Realtors. (Look for that capital R.)
All Realtors are real-estate agents, but not all real-estate agents are Realtors. Both are certified, but Realtors are members of the National Association of Realtors®. This means they have to abide by a strict code of ethics, and they may have additional certifications. For example, an At Home with Diversity Certification teaches Realtors how to work with buyers of different cultures, and a Military Relocation Professional Certification is useful for Realtors working with military members and veterans.
A good agent will work hard to communicate with the seller, tailor your experience to your needs, and make your offer competitive without increasing it to more than you can afford.
Consider offering more than the asking price
The US real-estate market is a seller's market right now, which means there aren't enough houses for all the people who want to buy. As a result, many homes are selling for more than the asking price.
A higher dollar amount can make your offer stand out, but think about the consequences before you bump up the offer. You don't want to pay more if you ultimately can't afford to do so. It probably isn't a good idea if the resulting higher monthly payments will make your life difficult in the long run.
Consider waiving contingencies
When you make an offer on the home, you will sign a contract before you close. You and the seller will agree to certain contingencies in this contact, which are the terms under which you will close on the home. You'll sign this contract after you make an offer but before you officially close.
For example, an appraisal contingency may state that if the appraisal shows that the home is worth less than a certain dollar amount, you can legally cancel the contract. An inspection contingency states that you have a certain amount of time to get the home inspected; you may cancel the contract if more than a certain amount is needed for repairs or request that the seller cover repairs.
There can be multiple contingencies in your contract, and waiving some could make your offer more competitive. The more contingencies there are, the greater risk that the deal will fall through — so a seller may prefer a buyer who waives contingencies.
Don't waive any contingencies that are important to you, though. If you know you want a general inspection, for example, don't waive the inspection contingency and risk buying a home that will cost you tens of thousands of dollars in repairs.
There are several ways to make your offer on a home successful, but think about whether these steps are worth any sacrifices.
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