August 25, 2022
Getting your offer to purchase a home in a hot seller’s market takes preparation and the right lender. If you’re not prepared or use a lender that doesn’t do everything possible to set you up for success, you might be in trouble. Read on to discover our top tips for success.
Get a Solid Preapproval
The term mortgage preapproval can mean different things to different lenders. For example, a less-than-diligent lender may preapprove you solely on a phone conversation without even pulling your credit.
Such lenders take a quick application using the information you supply. But the trouble is, some of that information might not be completely accurate. For example, if you’re self-employed, you might think you make $100,000 when, in reality, you only make $30,000 because you have lots of tax write-offs.
A solid preapproval starts with a credit pull. Your credit report not only shows your credit score but also your credit history. If your credit isn’t pulled and you have late payments (especially late mortgage payments), that can negatively impact your loan later.
Make Sure an Underwriter Reviews Your File
When you’ve completed your application and your credit is pulled, smart lenders put your loan through an automated approval system called DU, which stands for Desktop Underwriter.
DU will look at the data from your application and credit and determine whether or not your loan can be approved. In most cases, there will be additional information requested. Here are some examples:
- If you’re selling a home and buying a new one, the underwriter will want to see both sales contracts signed by all sellers and borrowers.
- If you’re using child support as income, you’ll need to supply your divorce decree and child support order along with proof of payment for at least six months.
- If you’re self-employed, you’ll most likely need to supply a current profit and loss statement and business license.
Submit a Clean Offer
There are times when you can request the moon and get it — that’s called a buyer’s market. But the rules are completely different in a seller’s market.
In a seller’s market, the seller has the advantage. There are multiple buyers who want to buy their home, and they get to pick the best one.
For you, that means you shouldn’t ask for anything extra. Let’s go over some examples:
- Don’t ask for them to include the fridge, fancy chandelier, or large play structure out back. Of course, the seller can offer, but don’t put it in your offer.
- Don’t ask for a super-long escrow unless that’s what the seller is looking for.
- When putting in an offer, be short, sweet, and generous.
Offer an Impressive Earnest Money Deposit
The amount of earnest money deposits can vary, but the best thing to do is consult with your real estate agent and ask them how much you should offer.
For example, if most buyers would offer a $5,000 deposit, by you offering a $10,000 deposit, would get the seller’s attention.
Consider Offering Above the Asking Price
Similar to the earnest money deposits, have a talk with your realtor to see how much you should offer. In some parts of the country, offering $30,000 or even $50,000 over asking price is commonplace in a red-hot market.
Know the market and be prepared. You don’t want to be underbid time after time, resulting in you getting discouraged and giving up.
Lock In Your Rate So You Can Relax and Be a Better Buyer
Once your offer is accepted, lock your rate in as soon as you can. The last thing you want to do when you have a hundred things on your to-do list is worry about what the rates are doing.
Lock your rate in and then you can be more present for any upcoming negotiations, inspections and moving preparations.
For a Simultaneous Close, Work With the Right Lender
If you’re selling your home and buying at the same time, it’s vital to work with an established lender who knows how to keep the loan moving along so it will close on time. That’s why members love credit unions — they know credit unions offer excellent service and rates.
Compete With Cash Buyers
Having a solid preapproval and putting in a clean and generous offer can help you stand out from the crowd. It’s vital during hot seller’s markets that you put yourself in the seller’s shoes and cater to what would be appealing to them.
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