Your Mortgage vs. A Cash Offer: What You Can Do

Cash is king in most business transactions, and it’s no different with mortgages. A cash offer can be very tempting for a seller because there is no risk of the buyer defaulting on their payment.

However, all is not lost if you’re going the way of the mortgage. You’ll just want to follow the steps below to make sure your offer is as appealing as possible.


1. Get your lender to back you up

A pre-approval letter from your lender is a must. It will also help if you can get your lender or real estate agent to show the seller financial statements that clearly display you’re a qualified homebuyer.

2. Have an appraisal ready

You don’t want to make the seller wait for your loan to be approved. Talk to your lender and find out exactly how fast they can get an appraisal done on the property, and when the loan will be approved. With some banks and mortgage brokers, it’s even possible to have an appraisal pre-ordered and ready to go.

3. Get inspections done right away

You don’t want to make the seller wait for anything. So as with everything else, get your inspection done as soon as possible.

4. Make a higher offer

When people pay with cash, they usually expect a discount. This provides an opportunity for non-cash buyers to make a higher offer. Paying more isn’t ideal, but if it’s what you have to do to get your dream home, it could be worth it.

5. Put more cash down

If you have some extra cash, consider making a higher down-payment. Instead of getting a mortgage for 70-80% of the purchase price, you could drop the financing down to 60-70% and potentially make your offer more appealing.

6. Make it personal

It’s not uncommon to write a letter to the seller, explaining a little about yourself and why you would love to purchase their home. A seller almost always appreciates knowing more about their potential buyers, and if you can strike an emotional chord, your chances of closing the deal could increase.

Bottom line:
At the end of the day, being flush with cash isn’t what makes the difference; it’s convincing the seller that you are a sound candidate to purchase their home.

If you have your finances straightened out, get things done in a timely manner, and can make a personal connection with the seller, you could very well beat out a cash offer.

source: totalmortgage.com

What Does It Mean to Be Pre­-Approved for a Mortgage?

Wouldn’t it be nice to know what you can afford before shopping for a house? With a mortgage pre-­approval, this is exactly what happens. Getting pre­-approved for a mortgage isn’t required to look at properties or bid on a home but there are advantages to meeting with a lender beforehand.

Pre-approvals help eliminate the guesswork when shopping for a property. Mortgage lenders can determine early on whether you qualify for a home loan and how much you can afford. Therefore, you don’t waste time looking at houses outside your budget.

A pre­-approval also tells realtors and sellers that you’re a serious buyer. It might come as a shock, but some sellers will not accept offers from bidders who are not pre-approved. Since sellers are eager to sell their homes and move on, they don’t want to take a chance with someone who might not be able to get financing.

Pre­-Qualification vs. Pre-Approval

It’s important not to confuse a pre-­approval with a pre-­qualification. Both are preliminary steps in the mortgage process, but there are differences.

A pre­-qualification is an initial assessment of whether you meet the qualifications for a mortgage, but it doesn’t guarantee financing. Pre-­qualifications are based on the information you provide on a pre-­qualifying form, which only asks for basic information like monthly income and an estimation of your credit score.

Understand, however, you can’t get a mortgage off a pre-­qualification. A pre-qualification says you might be a good candidate for a mortgage. A pre-approval, on the other hand, goes a step further. Getting pre­-approved for a mortgage involves completing an official loan application with the bank and going through the underwriting process.


Get started with your pre-approval today

What a Mortgage Pre­-Approval Entails?

With a pre-­approval, the mortgage lender will pull your credit and carefully scrutinize your credit activity and debts. You’ll have to submit your recent paycheck stub and tax returns from the past two years, plus provide copies of bank statements and disclose any assets you have.

Based on all of this information, the lender decides whether you’re eligible for a mortgage, and determines how much house you can afford. A pre­approval letter is the official green light to start looking for a house. If you must choose between a pre-­qualification and a pre-­approval, go with the latter. Unlike pre­-qualifications, pre-­approvals are practically written in stone, providing your credit, job status and income doesn’t change prior to closing.

Avoid Jeopardizing a Mortgage Pre­-Approval

It’s important not to make any significant changes to your personal finances after getting pre-­approved for a mortgage. Something as simple as getting store financing or financing a new automobile can jeopardize a mortgage approval.

This mortgage approval is based on your debt and income at the time of applying for the pre-­approval. Getting a new auto loan or acquiring some other type of debt before closing increases your debt­-to-­income ratio. And with a higher debt-to-­income ratio, there’s the risk of being disqualified for the mortgage. So wait until after closing to apply for financing.

The lender will check your credit about one or two days before closing to ensure no changes to your credit history and score. If everything checks out fine, you can proceed with closing and get the keys to your new house.


source: totalmortgage.com