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Mortgages | The Top 4 Things Sellers Need to Know About Today’s Mortgage Market



Most people who are selling their homes think they don't need to know a lot about the mortgage industry. They assume that buyers are the only ones that need to worry about interest rates, down payments, closing costs, and everything else that goes into a home purchase.

But a wise seller will educate themselves on today’s mortgage market to make sure that they find the right buyer.

So, what do you need to know?

1. Every offer is important
In several cities around the county, it has become a seller's market – meaning that the average homeowner is getting multiple offers on their home.

So which one should you accept?
Common sense would say the bidder who makes the highest offer, but experts say that's not always the smartest decision. Just because someone outbids another prospective buyer doesn't mean they can actually pay the price they are offering. What if they are unable to qualify for a mortgage or decide to back out if the appraisal is significantly lower than the purchase price?

Now the deal has fallen through, and other interested buyers may have moved on to other homes. That's why lenders say it's a good idea to consider all offers, asking each prospective buyer if they've been pre-approved for a loan, or if they plan to make a cash-only purchase.

2. Cash offers aren't always beneficial to the seller
We've just discussed that the main reason why transactions fail to close is that the buyer can't get financing from a lender. But when a buyer makes a cash-only offer, a lender isn't involved. That means you can all but guarantee that you'll get your money in the end.

So, what's the downside?
Most of the buyers making cash offers today are investors who are looking to purchase a home for a low price, with plans to flip it and then re-sell it for a profit. That means they will probably offer you less than someone who goes the traditional route.

So, you have to ask yourself, “Would I rather get cash now but have to sell for less than I expected, or wait and get more money from a buyer after they get a mortgage approval?”

3. Not all pre-approvals are the same
While it's important to make sure that your prospective buyer can actually get a loan, you need to remember that not all pre-qualification letters are the same.

Some lenders ask a lot of questions and want to see a significant amount of paperwork before issuing a pre-qualification letter, but others don't even require proof of income. They simply run a credit report, ask the borrower their income level and how much they want to borrow.

So, before accepting an offer, have your real estate agent call the loan officer who wrote the pre-approval letter. While the lender is unlikely to get into specifics, they will be able to tell your agent if the buyer is well-qualified or if they barely qualified. This information will help you determine the buyer's financial capability and if they can afford to buy your home.

4. FHA and VA loans sometimes have strings attached
Many sellers avoid or ignore buyers who want to get a Federal Housing Administration (FHA) insured loan or a mortgage through the Department of Veterans Affairs (VA). After all, most of the time, these buyers wouldn't be able to get a loan any other way, so they apply through these government agencies. Plus, these loans carry a negative stigma since they require sellers to cover certain costs.

Real estate brokers say you shouldn't blackball someone just because they are applied for a FHA or VA mortgage, but you should know the facts regarding these types of loans.

For example, many FHA loans require sellers to replace and repair all property hazards regardless of the buyer's financing. Also, VA loans make homeowners cover certain closing costs that would normally be split between the seller and buyer.

By educating yourself about these topics and others pertaining to the mortgage industry, you'll be better prepared to sell your home to the right buyer at the right price.


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