How to Make an Offer on a House

How to Make an Offer on a House

Making an offer on a house is the pivotal moment of the homebuying process. By this point, you have been working with one of our expert Realtors and have found the home that is right for you. You have determined that this home fits your budget and you are ready to make an offer. This can seem overwhelming, but our team will help you through every step.

Here is how to make an offer on a house that will result in a successful home purchase:

1. Compare Prices

While considering what offer to make on a house, one of the first steps is to compare the price to other recently sold homes in the area. Your real estate agent will help by running the comparisons for you. It’s important to understand what similar homes in the area have sold for over the previous six months. By examining not just the seller’s asking price, but how it compares to others on the market, you will be able to assess what the property is worth. From there, your agent can help you decide on the right amount to offer.

2. Decide on an Initial Offer

Consider whether you are competing against other bidders and how close the research of similar sales is to the asking price.  There is a lot of negotiation involved in buying a house. A common misconception about buying a house is that an aggressive approach is best. Our Realtors know, however, that there is a delicate balance to be found. You don’t want to start too low and risk insulting the seller. An aggressively high offer can sink the process just as fast. Your agent will work with you to find the perfect balance and help you make a great first offer on your potential home.

3. Submitting and Negotiating

After confirming with your Realtor what your offer will be, you submit the offer in the form of a contract to the sellers. Upon receiving your offer the seller can either accept it, counter it, or decline it. If they accept it, then congratulations! Your agent will begin to prepare you for the closing process. The most likely next step, though, is a counteroffer. This means that the seller has come back with some negotiations on price, contingencies, or the closing date. If they want to make a deal with you, then there will most likely be some lengthy negotiations. Our expert agent will help you through every step. If you can come to an agreement with the seller, then you can start the closing process!

4. After the Offer is Accepted

After you have made an offer on a house and it was accepted, you will start the closing process. Your Realtor will guide you through the mortgage process, inspections, and closing before you move into your new house. At this stage, you can breathe a sigh of relief, since you have now pivoted from homebuyer to future homeowner! If you have any further questions about how to make an offer on a house, or any other part of the home purchase process, please don’t hesitate to reach out! Our team is always happy to help.

What Credit Score is Needed to Buy a House in Ohio?

One key item to consider when financing a home purchase is your credit score. Your credit score determines what loans and interest rates you qualify for. It informs lenders whether your regular repayments will be reliable. Unless you are planning to pay cash for a house, you will need a loan, and therefore will need a decent credit score. Here is what credit score is needed to buy a house in Ohio.

Lenders determine how much home you can afford based largely on your credit score, or you and your spouse’s combined scores.

What is a Credit Score?

Your credit score is a numeric score based upon the information contained in your credit report. This credit report contains information on your financial transactions, such as credit cards, loans, and payment histories for taxes, utilities, and sometimes even rent, as well as other information including your pursuit of new credit. This information goes back for 7-10 years or more. It allows financial institutions to quickly and objectively evaluate whether you are a good credit risk based on how you handle your past and existing debt.

There are five categories that make up your overall score:

Payment History – This is about 35% of your score, the most important area of all. Have you made payments on time consistently? Are there any bankruptcies, liens, or other signs that you’re a risky borrower?

Amounts Owed – This is about 30% of your score, the second most important area. How much do you owe in total? Are your balances at or near the limit? Has there been a change in your spending habits recently? How much new credit do you seek? What is your debt-to-income ratio?

Length of Credit History – This counts for about 15% of your score. How long have you had credit? How long have you had a good credit score? Bear in mind, being an authorized user on someone else’s credit, even if you paid the bill, is NOT establishing a credit history. This begins with your own first credit card, apartment, or loan.

Credit Mixture – This counts for about 10% of your score. If you have only high interest accounts or loans, if you don’t have any credit at all, this can count against you. Higher scoring mixtures include a sample of credit cards, loans, and other types of credit. Financial institutions want to know you can handle multiple payments, and that you’re responsible with all your financial obligations.

Inquiries – This counts for about 10% of your credit score. Have you been seeking a lot of new debt lately? If you have, it’s a red flag, and a lower score, as it may indicate you’re taking on too much, too fast. If you DO need to shop around for a credit card or a mortgage, do it quickly. Typically you will not be penalized if there’s a short period of time that your credit is being checked. For example, eight mortgage inquiries made in any 14 day period will count as one inquiry.

Scores range from 300 to 900; as a measuring stick, 720 is considered a good score, but most lenders are looking for a score of at least 620. There are a number of different loans available, even if your credit score is not that strong.

Credit Scores and Mortgage Types

If you have a high credit score, you’re going to want to get a conventional loan. This is the most popular type of loan and almost every lender will offer it. The only qualifications needed are a credit score of 620 or higher, a debt-to-income ratio lower than 43 percent, and a down payment of at least three percent. This loan is your best option when it comes to getting the lowest rates for your mortgage.

If your credit score is lower than 620, don’t worry, there are still loans accessible to you. With low down payment options and a lower credit score limit, an FHA loan will probably be your best choice. Some of the benefits to this type of loan include qualifying even if you have filed bankruptcy and they can incorporate the closing costs into the loan.

To qualify for an FHA loan your future home:

1) must be appraised by an FHA-approved appraiser,

2) must be your primary residence,

3) must be occupied by you within 60 days of closing,

4) must undergo an inspection.

Unlike a conventional loan, you will have to pay a mortgage insurance premium on your FHA loan.

Credit Dos and Don’ts:

1. Don’t make large purchases during the mortgage process…even if there’s delayed payments. The total will still count in your debt-to-income ratio…and can change your pre-approval status, so beware!

2. Don’t open a series of credit accounts or take on several small loans to increase your credit history quickly. Remember, balance is the key, and a bunch of new accounts can make you look financially unstable or risky.

3. Do make regular payments and pay down any high balances. Hard work, but worth the increase in credit score.

4. Don’t close a bunch of accounts to “clean up” your credit score. A sudden reduction in accounts can count against you. If you do choose to close an account or two, try to choose a “younger account” as that will raise the age of your average history and improve your score. Closing all the older accounts will count against you.

5. Do check your credit report annually. Errors and identity theft take time to correct, and while you are trying to get a mortgage is NOT the time for lengthy resolutions!

6. Don’t assume that paying off balances at the end of the month will improve your score. While lowering balances is good, eliminating monthly payments on debt gives FICO less to score, and less history of on-time payments…so do pay some balances over time, to keep your score up and your credit history healthy.

7. Don’t get overwhelmed while figuring out what credit score is needed to buy a house in Ohio, contact us with any questions and remember our team is here to help you every step of the way.  

To learn more about purchasing property in central Ohio, don’t miss the Ultimate Guide to Buying a Home in Columbus, Ohio.

4 Must Know Tips before Building a House

Building a new house is an exciting project with a steep learning curve. There is much you need to know before embarking on building a home, but we are here to help you every step of the way! We ensure surprises are kept to a minimum, so you get to move into your dream home!

Here are 4 Must Know Tips before Building a House:

1. Find the right builder

When building a new house, the most important task is finding the right builder. You want to use a company that matches your needs, wants, desires, style, and price range.  

The new-build market is constantly shifting, builders come and go as new neighborhoods start, or complete.  Make a list of possible builders, if you have a preference already. If you’re not sure, what communities are being build or don’t have a custom builder you want to use.  Ask us!  We always have an ongoing list since builders keep us informed of new neighborhoods. We can even help you narrow down your choices by reviewing your wanted features and providing research on which builder will best fit your needs.

2. Have Buyer Representation

Use a REALTOR® who works with you on your behalf and is professionally and legally bound to represent your best interests. Buyer representation is important when building a new house because, not only will they help you find the right builder, they will work on your behalf to make sure that you are getting what you want and what they agreed to.

Another benefit of working with a good REALTOR® is that they will be looking at your new house with future resale in mind. The Columbus Team is intimately familiar with what buyers want and can advise you regarding choices that will improve your resale.

There is no fee to buyers when choosing representation, the builder pays a small percentage to the agent because using us saves them time and money as well.  The cost of building a home is the same price whether or not you use a REALTOR® but If you choose not to buyer representation, there is no one who is legally bound to represent your best interests. The Columbus Team has many clients who we represented during new home builds and they are very happy they did so!

3. Expect price increases

There are a many costs associated with building a new house. Unlike buying an existing home, every detail of the building and property is up to you. This includes everything from floorboards being 2” or 4” to light switch plates being brass or plastic. With each of these choices comes a varying cost. This process can become unexpectedly expensive, which is why we suggest adding $10,000 to $20,000 onto the initial cost of the home to cover your design choices.

If a community proves to be popular, the builder may raise prices as the homes sell, in the past once you were in contract you were insulated from these price increases. In 2021, the new build contracts vary by builder. There are many opportunities for the builders to insert clauses, often paragraphs, where you, the buyer, is responsible for any increased cost for materials above the original contract price.  These contractual paragraphs are called escalation clauses. Many builders are also adding clauses that state if the new build does not appraise for the contracted price, that the buyer will pay the gap between appraisal and build price.  

 “There is a lot of buyers’ beware in building a new home today,” says Sue Lusk-Gleich. “Buyers only build 1 house in their lifetime and do not understand some of these pitfalls could very well throw off their budgeting for a new home, including future unforeseen cost or loss of deposits if they cannot perform in the end because of financial changes to the transaction.”

“Realtors on the other hand help our buyers build houses every day and bring great value to the buyer client of a new build to help them understand situations they may find themselves in after the fact.”

4. Be prepared for it to take longer than expected

Everything from the weather to the delivery of parts can affect how long the project takes, regardless of the timeline you’ve been given. Building a new house is time consuming because it requires permits, inspections, plus schedule coordination of many different contractors, and suppliers working in conjunction with one another.

At times, it may be a frustrating process, but it will get done! Your REALTOR® keeps on top of the timeline and communication with the builder.  We represent you to ensure the house build meets your expectations and the contractual obligations. The Columbus Team consists of experienced new build REALTORS®.

If you found 4 Must Know Tips before Building a House helpful, or have any questions please  reach out!  We’re happy to help!

4 Myths About Homeownership

4 Myths of buying vs renting

According to recent studies, some 20.4 million renter households paid more than 30 percent of their incomes for housing in 2019. Economic fallout during the COVID-19 pandemic has resulted in a rental affordability crisis in the USA. Rising rents and limited housing have increase pressure on moderate-income households.

People rent for a lot of reasons, many of them good: flexibility, convenience, love for the high-rise life. But we also know that many renters dismiss homeownership out-of-hand when it might be the best option for them. Here are the four most common myths about buying a house versus renting an apartment.

MYTH #1: Ownership Is More Expensive.

If you compare the overall price tag to your monthly rent, homeownership doesn’t seem all that affordable. But unless you’re buying a home outright and paying in cash, it’s not a fair comparison. In many cases, a monthly mortgage payment will be comparable to (or less than) monthly rent payments, especially since rents are increasing nationwide. According to a 2021 study, median home prices in 287 of the 552 counties analyzed in the first quarter of 2021 were more affordable than past averages. Homeowners are also less likely to suffer from cost burdens than renters are.

Plus, unlike a rent check, a mortgage payment establishes equity in your home. It’s also tax-deductible.

MYTH #2: Forget Saving Money.

You might think that after a downpayment, and mortgage payments, and furnishing, and repairs, and maintenance, and property taxes… saving money is a lost cause. But think of it this way: Every mortgage payment that pays down principal and interest is a kind of “forced savings account.” You have to pay it, so you do. But unlike a rent payment, that money isn’t vanishing into the ether (or, as it’s more commonly known, your landlord’s pocket). Assuming you don’t default on your loan and go into foreclosure, you’ll see that money again, in a different form. By establishing equity in your house, you’ll be seeing long-term value in the form of an investment. You’ll also be eligible for new lines of credit. It might take 30 years to pay it off, but it won’t be 30 years of checks down the drain.

According to this 2020 Borrower Equity Update, the average equity gain per homeowner in 2020 was $26,300.

MYTH #3: No One Will Give You a Loan.

After the housing crash, banks are a little more cautious about lending to new homeowners than they were in 2007. Still, it’s not impossible to get a loan if you have decent credit and some funds in reserve. Even if you don’t have the standard 20% down payment, you might be able to qualify for a low downpayment mortgage from Fannie Mae and Freddie Mac. It backs mortgages with down payments as low as 3% for borrowers with credit scores of at least 620. That’s great news for young homeowners just entering the workforce.

MYTH #4: Home Ownership is for Old People.

According to the National Association of Realtors, over 36% of new homebuyers in 2021 were Millennials, making them the largest group of recent buyers.  Gen Z’s are now entering the market in small numbers, too.

Homeownership is a huge commitment, of course, and it should take more than reading a blog post to convince you to apply for a loan. Before you make any decisions, take a clear-eyed and ruthless look at your finances, your plans for the future, and your willingness to be responsible for basic home repairs. If you think homeownership is for you, get in touch with The Columbus Team to set up a consultation. Happy house hunting!

This article was originally provided in 2017 by Sam Radbil, a contributing member of the marketing and communications team at ABODO Columbus apartments. It has since been updated in 2021 with more recent statistics and information.