East West Lifestyle
How to Get Your House Offer Accepted in this Red-Hot Market
By Daisy Lin
Plan ahead to get your mortgage loan approved and land your dream home, even if you’re self-employed, a business owner, or recent immigrant
Grace Wang and her husband Andy Ng have been looking for a house in Southern California for nine months, with no luck. They have submitted multiple offers and were repeatedly outbid by other homebuyers.
“People are crazy nowadays. I’ve seen buyers offer 10% above the listing price,” Wang says. “As real estate prices keep rising, we need to prepare more and more down payment to meet the 20% mortgage requirement. Honestly, I’m debating whether I still want to buy a house or not.”
Some relief may be in sight for Wang and other frustrated home buyers, with early signs that the market may have passed its peak and is finally slowing its breakneck rate of growth. The latest housing data reports that the annual growth rate of home prices for active listings has decelerated the last few months, signaling some movement towards more balance. While the housing supply is still at historic lows, newly listed homes on the market are up 6.5% compared to a year ago, and that rate is even higher in large cities.
Realtors are seeing the difference on the ground, as well. Real estate agent Sanne Lee with A+ Realty says they still see multiple offers on a house, but not as many as before. “It's more reasonable now,” Lee says. “We used to see 20 or 30 offers on one house, but now we’re seeing more along the lines of two to four offers, unless the house is priced below the market.”
Lee encourages buyers not to give up and offers tips to get prepared in an improving market so that you can get your offer accepted for the home of your dreams.
Show your ability to purchase
It’s important to have all your documents lined up for the loan and your bank pre-approval in hand before you make your offer, according to Bella Qu, assistant vice president and mortgage customer experience manager at East West Bank. “The combination of accurate information and sufficient supporting documents is key to a good mortgage application package,” she says. “Although the loan application can be moved forward with minimum required docs, more supporting documents mean less loan conditions to clear later.”
Lee recommends collecting all your cash sources and depositing it into your account at least two months before you submit your loan application. Since lenders must verify that all funding comes from legitimate sources, large deposits and other irregularities on the statements that you submit to the bank become a red flag.
“You should be ready and not prompt the bank to raise questions or request for supporting documents during the loan process. Otherwise your loan might be delayed as a result,” Lee says.
To shorten the loan process time, homebuyers need to prepare some documents ahead of time, including:
- Verification of deposit form: Lenders will need to verify your financial information and may require a verification of deposit form to be completed by your bank where your deposit account(s) is at.
- Bank statements: The bank will ask you to submit copies of bank statements.
- Letter of explanation: You may need to prepare a brief document to explain any unusual or sudden activity in your credit report, banking statements, or employment.
- Gift letters: If you are receiving a gift from a relative or benefactor, be sure to have the gift letter prepared ahead of time and submitted with the loan application. The letter should state the amount of the gift, the relationship of the benefactor to the buyer, and stipulate that no repayment is expected. Once escrow opens on the sale, the benefactor can wire the funds directly to the escrow company. “You just have to keep all the documentation tracking where the money is from,” Lee says. “The source of the deposit has to be wire approved in order for it to be counted as usable down payment.”
Submit your best offer
If you find a house you truly love, Lee recommends submitting the highest offer that you can afford right from the start, because when there are multiple bids, the seller usually will accept the highest bid rather than negotiate. Lee suggests asking your real estate agent to research comparables in the area to gauge a competitive price.
“Don’t play games. If you want to live in that house, ask yourself, what is the highest dollar I'm willing to pay that I'm not going to regret?” Lee says.
Keep in mind that even if your offer is accepted, there can be other unexpected costs that come up, either from fees, or a gap between your offer and the home’s appraised value. If your offer is more than what the home is appraised for, you will have to come up with cash to make up the difference.
“I would set aside an extra 10% just in case,” Lee suggests.
Ceramist Tina Huang and Eric Jen saw their dream home and submitted an offer below asking price. They got outbid, but the other buyer did not have their financials in order.
“One day, as I was refreshing my search page on Redfin, I saw that the house was suddenly back on the market,” Huang says.
Turns out the previous buyer’s loan fell through, and since they had extra cash set aside and a preapproval, Huang submitted a new offer that matched what the previous buyer offered, and the owner accepted.
“We are relieved,” she said. “Our home is surrounded by fruit trees and a huge Chinese elm. We love waking up surrounded by greenery and the sound of our outdoor water fountain.”
“You should be ready, and not prompt the bank to raise questions or request for supporting documents during the loan process. Otherwise your loan might be delayed as a result.”
Out-of-the-box buyers
Getting a loan can be challenging if you don’t have a W2 job or an established credit history. For those out-of-the-box buyers, the key is to prepare the extra paperwork ahead of time and find an experienced lender.
For business owners and the self-employed, list all your assets on the loan application, including cash and cash equivalents, physical, liquid, fixed and equity assets. If you have part of your funds in a stock and bonds portfolio, keep in mind that only 75% of their market value is counted as cash to close.
If you can’t qualify for a loan based on the value of your assets, Qu recommends preparing the following documentation.
- CPA certification: a letter stating the partnership/ownership percentage, as well as the annual income.
- Schedule K1: a tax form that reports the income, losses and dividends of a business and its partners. Home mortgages for small business owners are easier to obtain if you can demonstrate consistent cash flow and a lower debt-to-income ratio.
For foreign nationals, recent immigrants and those holding work or education visas, find a lender that is experienced in working with non-citizens and can provide extra help.
Qu says it’s important to get various documents ready before you start looking for a house since it will take time collect them. If you have foreign assets, liquid or non-liquid, proof of ownership is required.
- For liquid assets, the buyer must provide bank statements. If they are in another language, they must be translated. Some banks will even provide translation. “Our branches can help to translate bank statements that are in Chinese, and they don’t need to be notarized,” Qu says.
- For non-liquid assets, customers need to supply the appraisal report, as well as proof of ownership. These documents will need to be translated, and the mortgage loan originator can help to certify the translation.
Lee says the key is to be prepared, so that when the right house and market conditions do come along, homebuyers will be ready to seal the deal.
“There’s still hope,” she says.