How
Financing Details Affect Your Offer
Since most
buyers do not have enough liquid assets or cash to purchase a house
independently, a mortgage is often needed to provide the financing for the
purchase. One of the main reasons that the details of your financing are
included in your bid is because the seller has the right to know of the
financing arrangements since the purchase is reliant on you obtaining a
mortgage.
Down Payment
The amount
of your down payment will be included as part of the offer. This is an item
of the financing arrangements that the seller is able to evaluate to determine
your probability of finding a mortgage. A larger down payment increases your
chances for obtaining a mortgage.
Asking for
Closing Costs and Financing Incentives
As a part of
the bid, you may ask for all or a percentage of your closing costs to be paid
by the seller or for another sort of financial incentive to be provided by the
seller. Often buyers request that the seller pay for the title policy.
Another common request is asking the seller to buy down your interest rate for
the first year or two. If the buyer is low on funds or close to the limit of
their debt to income ratio, these incentives can have a profound impact on the
outcome of the purchase.
Earnest Money
A common
belief of many home buyers is that a down payment is all that is needed when
extending a bid on a home. When offering to purchase a home, an earnest money
deposit must also be put up by the buyer as an expression of your commitment
to follow through with the offer.
An earnest money deposit also serves as a partial payment of the purchase
price of the home, and this amount is deducted from your down payment at
closing. Your builder’s salesperson will know more about the amount of
required earnest money for your specific purchase in greater detail.
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