Whether you are a seasoned or first-time homebuyer, there are a number of missteps you can make during the process. One particular aspect is the offer you make on a property.
Make an offer too high, and you could end up paying too much for a home. Too low, and you could offend the seller, bringing the process to a grinding halt. Conducting research to determine the prices of comparable homes in the area can certainly help. But did you know the financing you receive could also be a factor? Some experts say it can.
Down payment size
Many home sales are contingent on your ability to get a mortgage. With this in mind, Real Estate ABC notes it may be a good idea to tell a seller the size of your potential down payment. The reason it’s a good idea to disclose this information is that a seller will be able to evaluate your chances of obtaining a mortgage. Simply put, the more you pay up front, the higher your chances become. That means the seller feels more secure in accepting your offer and turning away other suitors.
Conventional home loans often require a down payment that is 20 percent of a property’s value. However, certain loan options require different amounts. For example, depending on your credit standing, a mortgage backed by the Federal Housing Administration or Department of Veteran Affairs often requires a smaller down payment or none at all.
If that level of disclosure isn’t enough, having your agent discuss the interest rate you intend to pay and are capable of paying can help in the same way. Sellers who know a borrower can still afford a home even if their mortgage rate isn’t extremely low may be reassured. In order to curb this issue, work with a lender to determine interest rates you feel comfortable paying and disclose the higher end to the seller.
Closing costs and points
In certain scenarios, you may be able to negotiate the closing terms of the home buying process. One popular negotiation point between a buyer and seller is the closing costs.
You may be able to convince the seller to pay for a portion of your closing costs during the home buying process. That can be a big help and lower your up-front cost. If a seller is in a difficult situation, they may even cover all the expenses.
Meanwhile, if the interest rate you receive is too high, the seller may be able to provide funds to buy points that could reduce the rate if they want to keep the sale.
However, if you can’t come to an agreement with a seller to help fund these additional costs, there could be other options. For example, you could adjust your offer and roll the expenses into the balance of the loan and pay them off over time, rather than up front.
FHA and VA loans are slightly different
If you are working with the FHA or VA to purchase a home, tell the seller as part of the offer process. Since the government backs the mortgage, there are certain fees the seller may be required to cover. Disclosing this information gives them time to prepare.
Talk to a professional at Freedom Mortgage to discuss your options and see if you are eligible for an FHA or VA loan.
Qualifying for a home loan is a major step in your personal finances. Freedom Mortgage is here to keep you up-to-date on the latest tips and tricks of the mortgage industry whether you’re looking to improve your home value or simply make a mortgage rate comparison.
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