Before we get to the terms you might include in an offer, let’s consider what’s needed to write an offer. Financing is the single most important piece next to knowing what kind of property you’d like to purchase. We cannot make an offer without proof of financing whether you’re paying cash, getting a loan, or pursuing seller financing. Here’s how each situation is usually handled:
- Paying Cash:
If you’re in the position to pay cash for a property then all you’ll need is proof of funds when we make an offer or immediately after the offer is accepted. However, providing proof of funds at the time we submit an offer goes a long way to making the seller confident in your ability to close. And if you’re competing against someone else, or trying to get a seller to accept your offer quickly, providing proof of funds with the offer can help with that.
If you’re receiving any portion of your funds as a gift, the “proof” for that specific amount would need to come from the “giftor” with a letter stating they’re planning to give you the funds. Even better, if they give you the funds before you write an offer so the “proof” can just come from you, then the seller doesn’t have to worry about your “giftor” changing their mind prior to closing. I know it’s a low risk situation, but I’ve also seen it happen and derail a closing.
- Obtaining a Mortgage:
It is imperative you have a loan approval before we start seeing houses and make any offers. Most people have a sense of what they can afford per month but that doesn’t mean you shouldn’t get approved for a mortgage as soon as possible. Especially with a changing interest rate environment, you might not know how much you can get for the payment you’re considering. Additionally, there might be something on your credit of which you’re not aware, or some other issue that needs to be resolved before getting an approval. And virtually no seller will be willing to accept or even consider an offer with an approval in hand. Afterall, why would a seller take a house off the market if you haven’t confirmed you’re capable of getting the financing and therefore closing? Once you have your approval we’ll be happy to jump into action and show you houses and write offers. Until then, you energy is best spent getting your financing identified so you can confidently make an offer on a house.
Let us know if you’d like a referral for a lender. If you’re already approved with a lender we’re happy to work with whomever you’d like, but using a local lender can offer some benefit as well. All other things (loan type and closing date…) being equal, lender choice can become a factor in deciding who gets the house. A local lender gives the seller a sense of comfort that the process will go well and that there will be less difficulty in resolving any issues should they arise. Having a lender with a known reputation in the area can go a long way to making your offer a success. That said, some people feel strongly about using someone they’ve used before. If you have a preferred lender from another market we can, of course, use them. Hopefully they are a “local lender” in that market and will have a similar sense of customer service and commitment to their reputation.
- Seller Financing:
The least common of the financing options is getting seller financing. Only a small number of sellers will consider this but it can be a good option for some buyers. Some situations where seller financing might make sense is if you have a larger down payment but have credit issues that might prevent you from getting financing. Common terms for selling financing include 3, 5, and 7 year loans, 10-20% or higher down payments, and interest rates that are usually higher than the regular mortgage rate. If this is the option that seems like it might work best for you, we can set up your property to search to only include properties where this might be an option.