1. Make Them an Offer They Can’t Refuse
Seller’s want to make sure they are getting the most money out of their home as possible. That means that if you try to submit a lowball offer, chances are the seller will reject it or it will get beat out by competing offers.
Making a fair offer above-asking price will certainly spark your seller’s attention. While you want to make sure you come up with a price that you are comfortable with and that is within your budget, even offering a few thousand dollars demonstrates you're a motivated buyer.
If you aren’t interested in upping the purchase price, consider putting down a larger earnest money deposit. This also tells seller’s you are serious about your intentions. Keep in mind that you can also write in key contingencies to protect your earnest money should the property not meet certain key expectations.
1. Add an Escalation Clause to Your Offer
In a seller’s market, your offer might be up against multiple competing offers. Adding an escalation clause could be the tool to give you a leg up on the competition.
An escalation clause is a provision in the sales contract that states that you are offering a certain dollar amount. However, if a competitor would outbid your offer, you agree to up your purchase price to a set price limit.
Setting up your offer in this manner can be quite strategic and make your offer stand out to a seller. It also helps streamline the bidding process for both parties.
2. Explore Mortgage Programs
One of the biggest hurdles for most first-time homebuyers is saving enough money for their down payment. But contrary to popular belief, you don’t need to put 20% down on a new home.
It's important to explore a variety of different mortgage programs available so that you can maximize the money you have already earmarked for your down payment.
Both Fannie Mae and Freddie Mac have their own affordable mortgage programs that allow eligible borrowers to put as little as 3% down.
Similarly, FHA mortgage programs have minimum down payment requirements as low as 3.5%. In some cases, certain mortgage programs may even allow you to buy a new home with no money down.
Utilizing a mortgage program with a low-down payment option could add additional homes to the pool of available homes that you can afford.
3. Lined Up Financing with a Pre-Approval
Sometimes it's better to start the purchase process with a little bit of preparation. One of the key items you should get lined up before you start your property search is the financing.
Around 87% of all homebuyers utilize a mortgage to finance their home purchase.1 Getting pre-approved for a new mortgage is a great first step and will set you up for success later down the road once you do identify your perfect dream home.
A pre-approval letter involves submitting a mortgage application with a lender and having them do a cursory review of your financial and credit profile. This could also include a preliminary review of your income and assets.
Your lender will then issue you a pre-approval letter for a loan amount that you should likely qualify for which you can use to demonstrate to sellers that you can buy their home.
Most sellers want to see a pre-approval letter accompanied with your purchase because it denotes you are a serious buyer. The extra benefit is that if your offer is accepted, wrapping up the approval on your mortgage should take significantly less time than starting from scratch.
4. Work With the Right Industry Professionals
Trying to navigate the home buying process alone is setting yourself up for a lot of headaches. Instead, the smart move would be to hire the right industry professionals to help support you throughout your home buying journey.
One of the most important professionals to hire is an expert real estate agent. Hiring a seasoned realtor will help you with negotiating and coordinating your home purchase. They can also advise you on which homes to avoid and which homes are a steal.
Another industry professional worth their weight in gold is a home inspector. Electing to get a home inspection report is always a smart move to ensure there are no hidden defects in a home that you are unaware of come time to sign on the dotted line.
Hire a home inspector that has a solid reputation and that is willing to walk you through any findings on the home inspection report.
Lastly, your mortgage lender can be an invaluable asset as you work through the financing component of purchasing your next home. Just make sure to research, shop, and compare multiple lenders to ensure you are getting the best pricing and service available.