Did you know you don't need 20% down?
Updated: Mar 15, 2019
One of the things I advise my clients to do before beginning their home search is to establish their purchasing power by getting pre-approved with a reputable lender.
As a buyer, getting pre-approved for your home purchase—before actually starting your home search—is imperative because it allows you to determine what homes you can actually afford. You may be surprised to find that it is higher than you think! In today's market conditions, buyers have a tremendous amount of purchase power.
This purchase power consists of three fundamental components: 1. Pre-Approval amount 2. Contingencies 3. Negotiating Power (counteroffering/strategic offers)
1. Pre-Approvals Many homebuyers assume that their pre-approval amount is a hard-line maximum amount that they can purchase. While this is technically true, the pre-approval amount is so much more! Depending on your lender, the pre-approval amount is the financial amount of "house" you can afford given your current financial position. What does this mean? For starters, it means that it is subject to change. Your lender (or lenders) have pre-approved you for this amount. It does not mean you're guaranteed this amount. Currently, in WA state, 0 down programs have become increasingly popular as housing programs and grants have paved the way for first time homeowners. Whether you qualify for 0 down programs or not, your pre-approval amount is typically higher than you'd expect. We can thank the economy and the market conditions for this.
2. Contingencies In the past, contingencies were viewed as "easy outs" regarding offers to purchase homes. What are contingencies? Contingencies are conditions that must be met in order to successfully execute a contract. The most common type of contingency is financing. When submitting an offer, your realtor (I hope this is me!) will go over your various conditions for the contract to be submitted. There is a clause that states that the offer is valid and can be accepted IF you're able to come up with the mortgage for the home. In other words, if you cannot secure the proper financing for the purchase of the home, you're not obligated to fulfill the contract and therefore, the contract is void. The more contingencies that exist in an offer means that the offer is less competitive. This is because the more "loopholes" or "exits" you place in an offer, the less likely the seller would consider the offer. There are "too many things that can go wrong". With sellers being more motivated than ever, they are more willing to accept these contingencies. Great news for buyers!
3. Negotiating Power Negotiating power is where I come in. A realtor worth their own weight in gold, should be able to navigate your transaction with finesse and confidence. Finding a realtor who is working in your best interest is absolutely imperative! Recently, I worked with a client to submit a counteroffer on a property they've had in mind for quite some time. With the strategizing and support from my team, we were able to entice the seller even more while bringing costs down for my client. I can negotiate your closing costs, passing the savings on to you. (Remember, buyers don't pay their realtors. The realtor gets paid by the listing agent if and when the house is sold!)
What can you do? Finding a lender is much like insurance shopping/car shopping; you want to see what's out there first! Different lenders offer different products and rates. In addition to helping you determine how much house you can afford, your lender will show you a variety of different types of financing and how much you qualify for with each type; determine what your down payment will be based on your available funds; and determine what your monthly payment will be to ensure you are comfortable with your total monthly payment.
I would be happy to provide you with the name of a dependable lending professional. I know experienced and reliable loan agents and lenders whom I can recommend with confidence as they’ve always offered first-class service to my clients.