How to make a competitive offer on a home?

In a buyer’s market, you may be able to make a low offer, tack on additional contingencies, and ask the seller to pay closing costs. But, if you try to make a low-ball offer with too many demands in a seller’s market, you may find yourself losing out to more competitive bidders.

In a seller’s market, your offer must stand out. Start by a mortgage pre-qualification from your lender. Mortgage pre-qualification is an evaluation, not a loan guarantee, by a lender that determines if you would qualify for a home loan. It also helps you set a budget for your house hunt. Getting pre-qualified is the first step toward getting a mortgage.

Submit your offer with the pre-qualification letter to show the seller that you are a serious and qualified buyer. If there are multiple offers on a home, the seller is more likely to accept an offer with pre-qualification.

In a seller’s market, a contingency offer might limit your home buying choices. Contingency clauses allow you to back out without losing your earnest money if certain situations arise. Contingencies also make your offer less attractive to sellers. Inspection issues or a low appraisal are relatively standard contingencies, but you may want to limit your contingencies, especially in competitive markets.

Sellers typically want to see offers at or near their home’s market value. Your real estate agent can help you write a fair offer, but you should stick to your budget in case of counter-offers or a bidding war.

What is a purchase agreement?

A purchase agreement is a contract between the buyer and seller that states the terms of the sale. The agreement includes the purchase price and any contingencies that both parties have agreed to. It is a legally binding contract, so make sure that it covers all agreed on stipulations before you sign.

What are the benefits of a home inspection?

A home inspection is usually optional, but it does help protect the home buyer from undisclosed or unknown issues. Licensed home inspectors will check for things like safety issues, non-working appliances, rot or mold, electrical, plumbing, heating, and air conditioning problems. They will also verify the structural integrity of the home and check the condition of the roof.

The home inspection allows you to address any issues with the house before you close. You may be able to negotiate with the seller to fix some of the problems or lower the purchase price to compensate for the cost of repairs. If you cannot reach an agreement or the inspection reveals substantial issues, you might be able to back out and keep your earnest money.

What are closing costs?

Closing costs are additional expenses that are part of the home buying journey. They may include loan fees charged by the lender, discount points, appraisal fees, and more. The title company will also tack on their own charges, and the local government will add various fees and taxes. Closing costs for the buyer typically add up to around 2-5% of the purchase price, but each situation is different. Contact a bank or a mortgage broker to find out more about mortgage closing costs.

How to manage your mortgage?

There are times when homeowners have to deal with large unexpected expenses. It may be tempting to start throwing money into your new home immediately after closing on your mortgage. But, it is important to stay on budget.

Instead of immediately tackling remodeling or redecorating projects, live in the new house for a while first. Give yourself time to adjust to the expenses of homeownership. You don’t want to spend a chunk of your savings on new flooring, then uncover an expensive plumbing issue. Take on projects in order of importance, and leave yourself a financial cushion for unexpected expenses.

If you have never had to pay for utilities before, be prepared for the additional expenses. Bills for electricity, water, trash service, cable, and internet add up. Some utility companies may also charge money upfront to start a new service. Try to put aside more money for utilities than you think you will need.

It is important to pay your mortgage on time every month, so make it a high-priority. You should try to have a savings safety net of 3-6 months of expenses. This should help cover your mortgage payment and other bills in the event of job loss, illness, or injury. It is often difficult to recover once you start to fall behind on payments, so practice financial responsibility from the start.

Talk to a mortgage lender and learn about your mortgage options.