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There aren’t two ways: it’s a tough real estate market for buyers.
Low mortgage rates combined with fewer homes for sale have created a binge eating. Bidding wars drive up house prices. But the problem for many isn’t affordability – it’s hard to just get an offer accepted on a home.
This problem is compounded for homebuyers who take advantage of down payment assistance programs or government-guaranteed mortgages, according to interviews with various industry experts. While these are essential tools for many first-time homebuyers, sellers’ agents have the impression that publicly guaranteed loans, such as FHA or VA loans, will make the sales process longer or more difficult, say these experts.
“But that’s just not the case,” says Shanequa Jones, a Houston-based NB Elite Realty real estate agent. “Real estate agents poison the minds of their sellers against these ready to zero or zero-down programs, ”Jones says. “I think it’s just a lack of education on the realtor’s side.”
Work with a real estate agent and loan officer who are familiar with the home ownership programs you have, to avoid common pitfalls.
Government guaranteed loans often have a minimum credit rating and lower debt-to-income ratio standards, in addition to requiring little or no down payment. Whether homeownership assistance programs and government loans live up to their negative reputation is a matter of debate and can be very situational. But the bottom line is this: This is the perception of many in the industry.
So if you are having a hard time getting your offers accepted, you are not alone. “I’ve been telling buyers from the start, it might not be as easy a process as your parents or uncle made it […] because of the market we are in, ”says David Dye, broker and owner of the Los Angeles-based company Goldview Realty. So you should approach home buying now knowing that it is unlikely to be an easy process.
While the likelihood of being rejected is high, you want to make sure that you are doing everything you can to improve your odds. And while every situation is different, there are a few things you can control that can give your deal a boost.
5 ways to help your offer get accepted
When it comes to making your offer more attractive, some of the usual tips are not available to those who use government insured loans. For example, buyers sometimes forego contingencies that allow them to opt out of the sale in certain circumstances. An appraisal contingency protects the buyer if the appraised value of the property ends up being less than the asking price. But, you can’t give up on evaluation possibility on an FHA loan or a VA loan. And even in cases where you can waive the evaluation possibility, it’s a risky move.
“I never advise the buyer to waive the possibility of evaluation or inspection […] it can be really harmful to them, ”Jones says. If you waive an appraisal contingency and the home is worth less than expected, you may have to pay the difference.
But there are steps you can take to strengthen your offering without putting yourself at risk.
Prepare in advance
Passing through the full mortgage pre-approval process with a lender before looking at homes should be your first step. During this time, the lender will check your income, assets, and credit score. This helps identify and resolve potential mortgage eligibility issues in advance.
When using a Home Buyers Assistance Program, you should coordinate this process with your lender and real estate agent. “The application for down payment assistance should begin at the same time as the mortgage application,” says Sean Moss, senior vice president and director of operations and customer support at Down payment resource, an online aggregator of homeownership assistance programs. Being able to get down payment assistance can help you qualify for a home loan, so it’s a good idea to involve your loan officer in this process early on.
Many housing assistance programs have additional steps that a buyer must take to qualify, and getting ahead of them can eliminate potential delays. For example, “a lot of these down payment assistance programs require the buyer to take a homebuyer training course,” says Moss. “If that is not done, it can cause delays. “
Work with people who know about these programs
It is essential to work with a lender or real estate agent who is familiar with the program you are using. If you qualify for a VA loan but your lender rarely works with seasoned home buyers, you are doing yourself a disservice. “For the consumer, it is important that they interview several realtors and loan officers and explore all of their options,” says Moss.
Each real estate transaction is local and personal. “The agent and loan officer in these transactions have a responsibility to educate the buyer and the other, but also the seller,” says Moss. “They need to give the seller confidence and comfort that they have a qualified buyer.” So work with an expert who is familiar with the local market and knows how to sell the assets of a buyer using a government guaranteed loan or down payment assistance.
You should ask your loan officer or agent to speak to the sellers to answer any questions about the offer. “I like to put everything in place for the seller. i will show them the [buyer’s] credit score and I have two lenders lined up […] I’ll show them proof of funds, ”Dye said. When you work with someone who is familiar with the type of loan or home buying assistance program you are using, they will be able to more easily address the seller’s concerns.
Write a letter to the seller
Ultimately, there is another human being selling this house and adding a little human touch that might help. “I’m asking buyers to write a letter and I’ll include it with the offer,” Dye says. A letter gives you the opportunity to tell your story about why you are looking for a home and hopefully make a personal connection.
This strategy won’t always work because some seller’s agents won’t deliver the letter to the buyer because they don’t want to risk a housing law violation. “You could tell how much you love this house and it just goes in the trash,” Jones says. So, in your letter, as much as possible avoid discussions about religion, ethnicity, or other matters that a seller’s agent might view as potential liability.
Increase your down payment
As part of an offer on a home, you include what is known as a good faith deposit or down payment. “A deposit shows you got skin in the game, it shows you’re not going to go out and bid on 10 different properties,” Dye says.
The deposit is held in an escrow account and may be included in the deposit at closing. If, as the buyer, you renounce the agreement and break the sales contract, that money may be forfeited to the seller’s benefit. But contingencies are usually included that allow the buyer to cancel their offer and keep their down payment if, for example, their financing fails or the appraised value of the house ends up being less than the sale price.
Although the deposit is unlikely to be pocketed by the seller, increasing your deposit will make you appear to be a more serious buyer. “We just got an accepted offer that was originally a $ 5,000 deposit and the buyer increased it to $ 10,000 and the offer was accepted,” Dye said.
Find properties that don’t sell quickly
Currently, homes do not stay for sale for very long, making it difficult for buyers. “This market is tough, but I tell buyers that the longer the house is on the market, the more likely you are to get your offer accepted,” Jones says. If you can find a home that has been on the market for a few weeks, there may be fewer other offers to compete with.
It might not be easy to find homes that aren’t selling in today’s market. So you may need to expand your search to areas that you did not initially envision. It might be overpriced or require costly repairs, which should be factored into your quote. You should also be aware that if a house does not sell, there may be underlying issues. So be sure to have the home inspected if you think that’s a possibility.
Getting an offer to purchase a home is difficult right now – and this is especially true for first-time homebuyers. Government guaranteed loans and down payment assistance programs that are designed to increase homeownership are also seen as potential complications for the closing process. Offers that involve these types of programs are therefore more difficult to get accepted.
As a first-time home buyer, you may need more patience to get your offer accepted. But if you take the time to prepare ahead of time and work with professionals who understand your situation, you can increase your chances of success.