The #1 Thing to Make Your Offer More Competitive


This blog is key for anyone interested in buying a home now or in the next few years as it's critical to compete in the current market. Recently, our clients have had incredible success using mortgage commitments to make offers instead of pre-approvals. See below for more info.

Receiving a mortgage commitment prior to making offers can make a major difference in a seller selecting your offer. Cash offers are always looked at most favorably so the stronger your financing terms the more likely a seller is to accept your offer over cash or other offers that contain financing.

Mortgage commitment vs pre-approval

A mortgage commitment means the bank has done a complete review of your financial information and has “committed” to providing a loan. A pre-approval is just a preliminary evaluation of your financial information and an estimate on the loan size the bank may provide after a full review of your records.

How does it make my offer stronger?

Mortgage commitments are stronger than pre-approvals because it shows the seller that a bank is already willing to support the home purchase and allows you to close faster. In competitive situations, the top offer prices are generally close together, so stronger financing terms provide a distinct advantage.

Example 1 (all parties are only pre-approved): You make an offer on your dream home and are competing with 2 other buyers. Your offer terms are a $715,000 purchase price with a 10% down payment. The 2 other buyers are also pre-approved offering $712,000 with a 40% down payment and $719,000 with 5% down payment. Whether it is true or not, most sellers believe a 40% down payment means the buyer is more likely to secure a mortgage. In this case the seller may decide to take $7,000 less than the highest offer because of the financing terms.

Example 2 (mortgage commitment vs pre-approval): The offers are the exact same as Example 1 EXCEPT you have a mortgage commitment instead of a pre-approval. The seller now perceives your financing terms to be the strongest because of the mortgage commitment, while the other buyers only have a pre-approval. In this case the seller may decide to select your offer ahead of the other 2 buyers even though it is not the highest price.

What does it cost?

There is generally no additional cost to getting a mortgage commitment.

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