Mortgage Shopping Tips
How do you know you're getting the best deal? Are all lenders the same? Here are a few shopping tips I share with my customers
It’s a zoo out there! I see houses come on the market, and they have six or eight offers within 48 hours. I routinely have multiple customers making offers on the same houses. I don’t even have to pay attention to new listings. I know they’re there because I get five phone calls from five different prospective buyers about the same house on the day it’s listed. Seriously.
The competition is fierce, and the reality is that most of my customers don’t get their first choice. I have one customer who just had an offer accepted after a year of looking. I’ve written six different pre-approval letters for six different offers, and provided them with twenty-five different estimates for different priced homes!
It’s tough to compete, and sometimes buyers think they can’t compete with:
a) people who have more money, and
b) people who are offering cash
But you can! It’s not easy, and you may not get your first choice. But watch this video for my tips to make your offer as strong as it can be.
*** VIDEO TRANSCRIPT ***
Hi, my name is Emily Caryl Ingram, and I’m a mortgage lender in Port Townsend, Washington.
Like most parts of the country, our real estate market is off the chain! When houses are listed for sale, it’s not unusual for them to have five or six offers within 48 hours, and many of those offers are cash. So, if you’re a buyer and you’re getting a mortgage, how can you compete in a market like this?
First, get pre-approved. And for all that’s good and holy, do it before you’ve found a house you want to buy. Here’s the scenario that plays out far too often in my office:
“Hi, Emily. It’s Henrietta Homeowner. The perfect home for me was just listed and I need to get pre-approved today because they’re reviewing offers tomorrow.”
Now, Henrietta is scrambling to complete the online application on her phone at work. Her HR gal is on vacation, and she can’t figure out how to download her paystubs. She lost the password to her Edward Jones account, and can’t remember her mother’s pet’s first name to retrieve it, and I’m trying to review her paperwork in-between the four appointments I already have scheduled that day. It’s chaos!
Don’t be like Henrietta. Get pre-approved before you even start looking at houses online. You have nothing to lose, and you’ll be one step ahead of the game once you find your dream home.
Your REALTOR will also have a variety of approaches to help your offer stand out from the crowd. Some of our buyers have success by writing a personal letter to the seller. Now, your REALTOR will warn you to tread very carefully to make sure you’re not violating the Fair Housing Act. A seller can’t choose to sell to you because you’re a single mom, because you grew up here, or because of your race, religion, or disability.
But you can tell the seller why you love the house, how you plan to maintain the garden, and why you want to move to their neighborhood.
Most purchase contracts also come with many contingencies. These contingencies release buyers from the contract if they can’t get homeowners insurance or if the septic inspection is unsatisfactory. We’ve seen many buyers whose offers have been chosen because they waived one of these contingencies.
The most common contingency we see waived is the appraisal contingency. Many houses have offers well above the listed price. When this happens, the seller may be concerned that the home won’t appraise for the desired value, and the buyer will end up backing out of the deal. By waiving the appraisal contingency, buyers agree to pay any shortage between the appraised value and the purchase price, or give up their earnest money.
You’ll want to carefully discuss this option with your REALTOR, and your lender, to make sure you’re comfortable covering any anticipated shortfalls.
We’ve also seen buyers waive their financing contingency. It’s risky. If a buyer isn’t able to get a mortgage, they could lose their earnest money. And I wouldn’t recommend it for a buyer with mediocre credit and no down payment. But for the buyer who’s putting 40% down, has an 800 credit score, and is retired and therefore not at risk of losing their job prior to closing, I’d feel a lot more comfortable with that buyer waiving their financing contingency.
We’ve also seen buyers compete by having a home inspection prior to making an offer and then waiving their inspection contingency. This will depend, of course, on whether or not the property is occupied, how quickly you can get an inspection, and how much time you have before all offers are reviewed. But we’ve seen it work when sellers know a buyer is satisfied with the condition of the property and won’t be asking for money for repairs.
Whether or not you decide to waive a contingency, make sure you put your best foot forward. This is not 2009. You are probably not going to buy a house for $350,000 that’s really worth $425,000. Sellers know it’s a sellers’ market. And if you’re getting a mortgage, you are competing with people who are offering more money than you are, and they may be offering cash. Put your best foot forward and make a strong offer.
Finally, exercise patience. You may not get your first choice, but you will find a home, you will love it, and it will all be worth it in the end. Good luck out there!
