How to Navigate a Bidding War
The demand for inventory has caused individuals to enter bidding wars with several potential buyers as soon as the house hits the market. Because of this, anyone looking to purchase a home has to have a leg up on potential "competitors."
The loan process includes a lot of variables
In my 12-year career as a mortgage banker, I have personally and professionally experienced the volatility of the real estate market.In today's market, we are seeing extremely high demand for homes with very limited inventory. I have several clients who want to sell their homes, but have encountered issues finding a new home to purchase. If a new listing is priced right and is in good condition, it is common there will be several contracts and the home will sell for over asking price.The demand for inventory has caused individuals to enter bidding wars with several potential buyers as soon as the house hits the market. Because of this, anyone looking to purchase a home has to have a leg up on potential "competitors."How can you do this? I will let you in on my personal secret. Anyone looking to purchase a new home is most likely getting pre-approved by their mortgage professional prior to starting their search. When the bidding war begins, the only advantage a buyer has is in the financial figures. How much you are willing to pay? If you start the loan process beforehand, you may have an upper hand.Here is the scenario: You want to buy a house, so you get pre-approved by your mortgage banker. In order to have the upper hand, you should take it one step further and start the process of underwriting your loan. Once your loan is underwritten and approved, the lender will issue a loan commitment letter to secure financing. Once you find a home, you place a bid and, in some cases, begin the bidding war. However, remember you have an advantage: you were not only pre-approved, but you secured your financing. When reviewing the offers, the buyer can take comfort in the fact later on in the process the loan will not fall through and no issues will arise. This added advantage will help you beat out the competition and secure the home of your dreams.The loan process includes a lot of variables, but it can actually be a pleasant process - as long as you do your homework and listen to your mortgage professional. If you are looking at buying a new home within the next 90 days, I recommend taking the following steps:1. Get pre-approved by a recommended and licensed mortgage banker; preferably local.2. Gather the necessary tax documents and bank statements. Your mortgage banker will provide you with a detailed list.3. Start the loan process with your loan officer.After the loan has been submitted to processing and the underwriter clears conditions, they will issue you a loan commitment letter subject to an agreed on sales contract and appraisal. At this point, most of the loan work is done and you will be able to close on your home quickly and without delays. In addition, the commitment letter to financing could potentially be the competitive edge you need to beat out other contracts.For more information about buying and owning a home, visit www.stlrealtors.com to find a Realtor.