Will Your Offer on a Home Be Accepted? Financing Matters

When you compete for a home against other bidders, the seller is considering more than just how much you'll pay – particularly when several offers come in at roughly the same price.

A seller wants to make sure that nothing will go wrong in the process; how you're paying for a home and who you're getting the money from can make a difference. Let's review some of the ways people pay for homes – and how they're viewed by real estate agents and sellers.

The all-cash offer, where the buyer can pay for the home without a loan, is highly appealing to sellers. All-cash deals can be done quickly – within a week or two rather than a month or two – and there's no need to worry about financing, making it more likely the deal will go smoothly. All other things being equal, an all-cash offer is usually a winning offer.

But most of us can't afford all cash. The traditional home loan is a 30-year-fixed, with 20 percent (or more) down. If you use this product, a seller will likely assume you're in a solid financial situation – and that you'll encounter few problems with financing, provided you've already gotten preapproved. You'll be in good shape if you make an offer with these terms.

If you have good credit and you're willing to pay private mortgage insurance (PMI), it's not uncommon to put as little as 5 percent down. This is a great solution if you have a steady income, but relatively little in savings. However, if you put very little down, and you're in a multiple offer situation, a seller may feel that there's a higher chance of something going wrong when you seek financing – and you may be at a small disadvantage.

Most of that disadvantage can be overcome if you're working with a lender known for getting deals to the closing table. It's not unheard of, for example, for a lender who has a previous relationship with a seller's agent to call that agent and provide assurance that the potential buyer has great credit and will have no trouble securing a loan.

You want the seller's agent to know that your lender will personally look into any hiccups that come along and solve them before they become more than hiccups. When competing with others, a phone call like that can be the difference between getting a home or not, particularly if you're applying for an FHA loan or a VA loan, both of which require additional paperwork. This is why it's not just the type of financing that matters, but also where you choose to get financed.

Lending departments at larger banks are somewhat infamous for not being able to adapt quickly should something change as you work to get to the closing table. Real estate agents are aware of this. Often, they will advise their seller to give serious consideration to the offer associated with a lender who has a history of working carefully to get a deal done on time, even if the big-bank-backed offer is slightly higher.

While these differences may seem slight, in a competitive situation it is sometimes the small advantages that add up to one big victory: a new home!

Dan Bergman is a real estate agent with Redfin, a national real estate brokerage. He serves the northwest suburbs of Chicago, where he works to find homes that meet his clients' needs and goals at a fair price. A lifelong Chicagoland native, Bergman enjoys mountain biking, hiking and good coffee. And, of course, he's a Bears fan!