Homebuyers are doing all kinds of things to make their offers stand out in this low inventory seller’s market, including removing remedy and or inspection contingencies to bidding well over the asking price with appraisal gap coverage. One tried and true technique for making a competitive offer remains popular and that’s the all-cash offer.
If you’re planning to finance your purchase we have a little secret… You can essentially make a cash offer even if you’re planning to take out a mortgage… You just need to find the right lender to help you get everything in order.
What is an all-cash offer anyway?
First, the basics. An all-cash offer is (usually) exactly what it sounds like, it means the buyer plans to pay all-cash for the home s/he has put an offer on, and can provide a proof of funds letter to prove they have the funds in the bank to fund the purchase. Cash offers usually mean a more streamlined process for both buyers and sellers, and many sellers prefer the certainty of unfinanced cash when it’s an option.
Buyers who plan to take out a mortgage, represent great risk to the seller.
Seller’s must take the house off the market once they accept a contract, as a result the seller loses a potential two to three weeks if the buyer doesn’t get approved for financing, or if the home fails to appraise and the offer didn’t include appraisal gap coverage.
The less financing involved in a real estate deal, the more favorable a seller’s view of the offer will usually be.
With this in mind, it should come as no surprise that in this market sellers buyers are doing everything they can to compete including submitting all-cash offers.
How can you compete with cash if you still need a mortgage?
While it’s true that all things equal sellers prefer all-cash offers, it doesn’t necessarily mean you can’t compete in this frenzied market even if you still need a mortgage.
There are some ways you can use a loan to finance your purchase and still be considered a cash offer. The most common method is a decision-now approval, also called an underwritten preapproval or upfront underwriting.
While it’s not exactly the same as cash, it’s almost as good as a decision-now approval, means the loan has already been funded and the lender has verified financing is accounted for. This means the buyer can more comfortably remove financing contingencies from his or her offer without worrying about losing their earnest money deposit, because ther mortgage is already secure.
Decision-now mortgages help streamline the closing process and can allow nontraditional homebuyers to better compete with cash buyers.
Because not all lenders offer decision-now mortgage approvals, shopping around is even more important if you think this could be the right product for you.
Many lenders offer upfront underwriting, but larger institutions like Chase or Wells Fargo tend to favor the traditional mortgage application process, because underwritten preapprovals can clog their already-busy pipelines. A mortgage broker should be able to help you find the right lender for whatever loan products you’re looking for.
Tips for buying a house in a seller’s market
If you’re ready to buy a house and are worried about the competition, there are a few strategies that could help you along the way.
First, it’s a good idea to work with a trusted Realtor and mortgage lender who can make sure you’re getting the best deal.
Other recommendations include:
- Being ready to move fast when you find a house you love
- Going through the full underwriting process before you make your offer
- Making sure your offer is aggressive enough to stand out — but not too expensive for you to afford
Tips for financing your home purchase
Whether you get a decision-now mortgage approval or go through a more traditional contingent loan application, the process is more or less the same.
Here are the 10 key steps to buying a house with a mortgage — and remember, in a competitive market, it’s a good idea to get your loan secured as early in the process as possible.
- Strengthen your credit
- Know what you can afford
- Build your savings
- Find a mortgage lender
- Choose the right mortgage
- Get preapproved for a loan
- Begin house hunting
- Submit your loan application
- Wait out the underwriting process
- Close on your new home
Bottom line
A competitive housing market means buyers need to be especially savvy and use whatever advantages they can to close the deal on their new home. One way of doing that is to make an all-cash offer, which you can still do with a mortgage if it’s underwritten in advance.
If you, or someone you know is considering Buying or Selling an Investment Property in Columbus, Ohio please give us a call and we’d be happy to assist you!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235
