If you are like most homebuyers, you are going to need to obtain a mortgage loan before you will be able to purchase a new home. As such, many buyers make the purchase of a home contingent upon obtaining a loan. While this makes sense for the buyer, it is important to realize that the seller has an interest to protect as well. Therefore, the seller is entitled to obtain information regarding your financing plans before making such an agreement with you, which means it is important to include all of the proper financing details in your offer. To that end, here is a look at the purchasing details that are typically included in an offer.
Down Payment
Within your offer, you will need to disclose the amount of the down payment you plan to make on the purchase of the home. In this way, the seller can more effectively evaluate the likelihood of you obtaining a loan, as it is far easier to get approved for a loan if you have a larger down payment.
Interest Rate Cap
It is no secret that the interest rate on your mortgage loan will have a significant impact on whether or not you take on a loan. After all, even a slight increase in the interest rate can increase the overall amount you spend when repaying your loan. Therefore, your offer should also contain the maximum interest rate you are willing to accept from a lender. Of course, when setting your maximum acceptable interest rate, you should be sure to allow for some flexibility. After all, if you aren’t willing to budge any higher than the current interest rate, the seller stands to lose out on valuable marketing time if the interest rate happens to go up.
Closing Costs and Other Incentives
As part of your offer, you may request that the seller pay all or part of the closing costs. Or, you may ask that the seller provide some sort of financial incentive, such as buying down your interest rate for the first year or two. Obviously, making such requests may take away some of your negotiating power in terms of the price since you are essentially asking the seller to give you some money to purchase the home.
Another incentive you might include in your contract is to ask the seller to carry back a second mortgage on the home. With this option, you can save some money by avoiding having to purchase mortgage insurance. Of course, this option will not be attractive to a seller who needs the money from the sale of the home to purchase a new home. Therefore, you shouldn’t be too surprised if a seller is unwilling to accept these terms. If the seller is willing to go this route, on the other hand, your offer should specify your repayment terms.
Even if you are planning to pay for the home with cash, your offer should include some sort of documentation demonstrating that you have the cash necessary to purchase the home. A simple bank statement will suffice unless you have to liquidate some assets in order to obtain the necessary funds. If this is the case, your offer should include a timetable as to when you will be able to have the cash available to complete your purchase.
Jim Olenbush is the owner of an Austin real estate brokerage. http://www.jimolenbush.com/ He manages a team of experienced Austin Realtors and they specialize in luxury real estate sales.
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