Navigating the Offer-Making Process – A Homebuyer’s Guide

You may be in a multiple-offer situation after getting prequalified and preapproved for a mortgage, finding your dream home, and negotiating with the seller. In this scenario, the best way to stand out is not through an inflated offer price but rather by entailing terms such as a quick closing schedule or waived inspection contingencies.

Getting Preapproved for a Mortgage

Getting pre-approved for your mortgage early can help you determine what you can afford and avoid the potential shock of finding out that you don’t qualify for the loan you seek later on. Every lender is different, so it’s important to understand what documentation each requires and how long the process will take. Realtors like the Ramsey Realtors often have a network of trusted mortgage professionals, including loan officers and brokers. They can refer buyers to these professionals who can guide them through the pre-approval process.

Obtaining mortgage preapproval is more thorough than merely being “prequalified” and typically involves verifying income, debt, and other financial information. This can save time in the home buying process and tell sellers you are a serious buyer.

Once pre-approved, it’s important to stick to the budget you set for yourself. Changes to your finances or purchasing a new property may jeopardize your approval, so it’s crucial to communicate with your lender throughout the process. Your credit score and the property’s appraised value are other factors that can impact your mortgage eligibility.

Finding Your Dream Home

Once you’ve found a home that’s the one, be prepared to make an offer quickly. Sellers prefer buyers with mortgage preapproval letters, and they may be more willing to negotiate if the offer contains few contingencies.

Ask your lender about down payment assistance programs if you’re a first-time homebuyer. More than 2,000 of these are available nationwide, often covering the down payment and closing costs.

During your home search, use online listings and attend open houses to view properties and take notes. Be sure to look for signs of home repairs and renovations that could impact resale value. Also, consider neighborhood demographics and recent sales data. Comparable sales can help you decide how much to offer on a house.

Making an Offer

Once you’ve found a home that meets your needs and is within your price range, it’s time to make an offer. Your agent will help you determine the right price to offer, considering the home’s recent sales and your budget.

When you submit your offer, you’ll typically need to provide a good faith deposit, known as earnest money. This amount can vary by area but is generally 1%-3% of the home’s sales price. It demonstrates to the seller that you are serious about buying their home and have the financial means to follow through with your purchase.

After reviewing your offer, the seller can accept, counter, or decline it. When the seller counters, it’s important to consider their reasons and be prepared for a back-and-forth of negotiations. You want to create a purchase agreement that is as favorable to you as possible.

Negotiating

Buyers need to be prepared for and open to negotiations regarding home buying. 

While negotiation is a standard part of the home-selling process, there are situations where poor negotiation strategies or challenges in the negotiation process can make it harder to sell a house, check on the article What Makes A House Harder To Sell In Minneapolis: The Unspoken Truth for tips and information. Learning what’s negotiable (hint: it’s not just the price), how market conditions factor in, and some tried-and-true negotiation tactics will help aspiring homebuyers navigate this process. 

Once you’ve found the home of your dreams, it’s time to make an offer. Your real estate agent will compile a written offer sent to the seller’s agent, which could be accepted, countered, or rejected. If you are in a bidding war, your real estate agent will guide you to help you compete successfully. In a competitive market, buyers may need to raise their offers or make other “concessions,” such as increasing the earnest money deposit, giving up inspection or appraisal contingencies, or changing contract default periods like a rent-back agreement. Your agent can help you understand the benefits and drawbacks of each. Ultimately, it’s about finding the balance that works for you.