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How To Make an Offer on a House: Steps + FAQs

a beautiful brown house on a hill

The home-buying process can seem overwhelming; from avoiding mistakes first0time homebuyers make to understanding all the paperwork, there’s a lot to think about.

But once you’ve found the perfect property, it’s time to make an offer. Thankfully, we’ve got a step-by-step guide to help make the process as smooth as possible.

1. Get Your Finances in Order.

The first step is to get your finances in order. Your finances will play a big role in how much house you can afford and how much you can offer. Here are a few things to keep in mind:

Check your credit score and report.

You’ll want a good credit score (700+) before applying for a mortgage. If your score is lower than you’d like, take some time to improve it before making an offer on a house.

Otherwise, you may not be approved for a loan, or you’ll have to pay a higher interest rate. You can check your credit score and report for free with sites like Credit Karma and Credit Sesame.

Get pre-approved for a mortgage.

Whether you’re looking at a townhouse or looking at the pros and cons of owning a beach house, you need to get pre-approved for a mortgage. Getting pre-approved means a lender has looked at your financial information and is willing to give you a loan up to a certain amount.

This is helpful for two reasons:

  • You’ll know how much house you can afford and what kind of monthly payments you’re looking at.
  • It’ll make your offer more attractive to sellers since they know you’re already approved for a loan.

You can get pre-approved for a mortgage by submitting your financial information to a lender. They will then conduct a hard inquiry on your credit, slightly lowering your score. But as long as you shop around for a mortgage within 30 days, the inquiry should only count as one hit on your score.

Calculate your down payment.

Your down payment is how much cash you’re putting towards purchasing your home. The more you can afford to put down, the better. A larger down payment means a lower monthly mortgage payment and less interest paid over the life of the loan.

A good rule is to aim for a 20% down payment. But if you can’t swing that, don’t worry. There are plenty of low and no-down payment mortgage options available.

Get an estimate of your closing costs.

Closing costs are the fees associated with buying a home. They can add up to several thousand dollars and typically include loan origination fees, appraisal fees, and title insurance.

You’ll want to know how much your closing costs will be before making an offer on a house. That way, you can factor them into your budget and avoid surprises down the road.

2. Determine how much you can afford.

Now that you have a better idea of your finances, it’s time to start thinking about how much house you can afford. Here are a few things to keep in mind:

Consider your monthly budget.

When determining how much house you can afford, don’t just consider the purchase price. You’ll also need to factor in monthly mortgage payments, property taxes, insurance, and repairs.

Sit down and take a look at your budget. How much can you comfortably afford to put towards a mortgage each month? And how much are you comfortable spending on other monthly expenses?

Use an online affordability calculator.

Checking your monthly budget is a good starting point. But if you want a more accurate estimate of how much house you can afford, use an online affordability calculator.

Enter your financial information, including your income, debts, and down payment. Then, the calculator will estimate how much house you can afford based on your budget.

3. Write Up Your Offer.

House with a for sale sign in the yard

Once you know how much you can afford to pay, it’s time to write up your offer. Here’s what you’ll need to include:

Your purchase price

The amount you’re willing to pay for the property. Remember that you may not want to offer the full asking price, especially if the market is hot. For example, if a home is listed for $300,000, you may want to offer $285,000.

Your down payment

Include how much cash you’re putting down towards the purchase. This is typically a percentage of the purchase price, such as 3% or 5%.

Your loan amount and type

If you’re financing the purchase, how much you’re borrowing from the lender and what type of loan you’re using. This is important information for the seller, as it lets them know how much cash they’ll need to bring to the table at closing.

Your loan terms

The interest rate and monthly payment amount for your loan. This is helpful information for the seller, as it gives them an idea of how much you’ll be able to afford each month.

Your contingencies

Any conditions that must be met for the deal to go through. For example, you may have a contingency that says you’re only willing to buy the house if it passes a home inspection.

Your earnest money deposit

An upfront deposit shows the seller you’re serious about buying the house. This is typically 1% to 3% of the purchase price and is held in escrow until closing.

4. Submit Your Offer.

Once you’ve written your offer, it’s time to submit it to the seller. If you’re not working with an agent, this can be done through your real estate agent or directly to the seller.

The seller will then have a few options: they can accept your offer as is, reject it outright, or make a counteroffer. They’ll usually come back with a higher purchase price or different loan terms if they choose to counteroffer.

You can then decide whether to accept the counteroffer, make a new offer, or walk away from the deal.

5. Negotiate the Terms.

Suppose the seller accepts your initial offer, congrats! You’re one step closer to buying your dream home. But before you start celebrating, you’ll need to negotiate the terms of the sale.

This is where repairs, closing costs, and home inspections will be negotiated. For example, the seller may agree to make repairs to the property before you close on the deal. Or, they may agree to pay a portion of your closing costs.

Have an experienced real estate agent by your side during negotiations. They can help you get the best possible terms for your purchase.

FAQs

Q: How do I make an offer on a house without a real estate agent?

A: If you’re not working with a real estate agent, you can submit your offer directly to the seller. You’ll just need to include all of the same information that you would if you were working with an agent.

Q: Can I make an offer below the asking price?

A: Yes, you can. In fact, it’s common to offer below the asking price, especially if the market is hot. The seller may counteroffer with a higher price, or they may accept your offer as is.

Q: Do I need a down payment to make an offer on a house?

A: Yes, you will need to include a down payment with your offer. The down payment is typically a percentage of the purchase price, such as 3% or 5%.

Q: Why do I need an earnest money deposit?

A: An earnest money deposit is a way to show the seller that you’re serious about buying the property. This deposit is typically 1% to 3% of the purchase price and is held in escrow until closing.

Conclusion

Making an offer on a house doesn’t have to be stressful. Just be sure to include all the important information and have an experienced real estate agent by your side. With their help, you can get the best possible terms for your purchase.

Kelly Hudson

Hi there! I’m Kelly and I’m your friendly neighborhood mom! I work as a marketing assistant and I’m the woman who writes for Work Home Tips! I’m here in Seattle with my two sons, Gian and Gino, and we’re living our best life!

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