If you are searching for your dream home, and need a mortgage, you may feel defeated if you are going against a cash offer. A cash offer is when a person can pay for a house up front, with no lender or mortgage involved. Cash offers can be appealing to sellers because the seller knows that the sale is not contingent on a loan being obtained and can usually close more quickly. As a buyer does this mean you should fear the cash buyer, or worry that you will not have a chance at the home of your dreams? Absolutely not. So what can you do to better your chances when bidding against a cash offer?
Make sure your fiances are in order. Ask yourself these questions:
- Have you been pre approved? If you are thinking of buying a home, that is the best way to begin the process. A pre approval letter is necessary when putting in an offer.
- Do you have 20% down? If you are using a loan that requires a smaller down payment, make sure you have cash reserves available.
- Are you employed? Will you be able to handle your monthly mortgage payments, and bills? If you haven’t discussed this with a lender, now would be a good time to see what you can afford.
- Do you have very little debt? If you have a lot of debt, now would be the time to work on lowering your debt to income ratio. Again, talking to a lender can help you.
- Do you have good credit? This will help throughout the loan process.
Once you have your finances in order you will be ready for the next step, making an offer.
- When making an offer, make sure it is competitive. A competitive offer will be as strong as cash. Show the seller that you are serious. Have a pre-approval letter from lender ready. Consider showing bank statements and credit reports. This allows the seller to see that you are able to follow through with your loan. Cash buyers tend to offer low, expecting a discount because they are offering cash. To increase your chances, make sure you have a good, fair and competitive offer.
- Shorten wait times. Try to shorten your loan and appraisal contingency times. Sellers like to have the home close as quickly as possible. Which cash offers allow. Talk with your lender and see what their turn around time is, and go from there. Have your inspector in and out. Inspection is something that can cause a seller (and buyer) stress. Get it out of the way quickly, so everyone can move forward.
- Become a person to the seller, not just a buyer. Add a little note to let the seller know why you like the house and what your intentions are. You can ask your realtor to add the note with the offer.