Introduction of Down Payment and Incentives

Buying a home typically requires obtaining a mortgage to finance the purchase since most buyers don’t have enough cash available. The seller has the right to know about your financing plans as they may affect the purchase. That’s why financing details are included in your offer, especially if it’s contingent upon obtaining a mortgage.

Down Payment

As part of your offer, you will need to disclose the size of your down payment. Once again, this allows the seller to evaluate your likelihood of obtaining a home loan. It is easier to get approved for a mortgage when you make a larger down payment. The underwriting guidelines are less strict.

Asking for Closing Costs and Financing Incentives

As a buyer, you may sometimes request the seller to cover a portion or all of your closing costs, or provide other financial incentives, as part of your offer. One example is asking the seller to fund a temporary reduction of your interest rate for the first one or two years. These incentives can be highly effective, especially if the buyer has limited funds or is pushing their qualifying ratios to the limit. It is important to discuss these options with your real estate agent to determine the best strategy for your individual situation.

Whenever you ask for incentives such as these, you will probably find the seller less willing to negotiate on price. After all, what you are really asking for is have the seller to give you some money to help you buy their house. The end result is that, for a little relief in the beginning, you are willing to pay a little more in the long run.

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