Why does my loan type matter to a seller? Loan types you typically see are Conventional, FHA, and VA. Each have their own set of benefits for buyers, but why does a seller care what type of loan a buyer is using?
- One of the main reasons a seller might favor one offer over another due to financing type, again comes down to the cost to a seller, and risk assessment of the transaction falling apart down the road. Some loans have a slightly higher fee that the seller is required to pay at closing, while others have no fee due from the seller. When two offers are close in offer amount, a seller might choose one offer over another based on the tiniest of details.
- Some loans have stricter qualifications on the condition of the home. This goes back to the appraisal and work orders. A Conventional loan typically is the least strict on condition, out of the financing options listed above. It is possible to have work orders come back on a house being purchased using a Conventional loan.
- Some loans require little to no money down. Why does a seller care how much you’re putting down? Typically a buyer putting a higher amount of money down looks more solid to a seller, meaning it is less likely their financing will fall apart towards the end of a transaction, causing the deal to die. Another reason a larger down payment looks attractive to a seller is typically sellers want to negotiate items that the buyers request them to fix after they have an inspection. Usually the goal for the sellers is to fix the least amount of items possible. If there are terms of an offer that indicate that the buyers might not have a ton of cash on hand (such as little to no down payment, or if they are using down payment assistance), the seller might worry about the buyer asking for more fixes on the inspection, or asking for a credit towards their closing costs to help them make fixes themselves after close. In summary, more cash can signal higher likelihood that the buyer(s) can handle fixes, and fees on their own, without asking for help from the seller(s).
When you have many offers all coming in around the same value, you get into weighing more of the gritty details like loan type, earnest money and down payment amount, closing date, inspection time, to the tiniest of details, more heavily.
As a buyer, your agent communicating with the listing agent prior to writing and submitting the offer to find out what terms the seller is looking for specifically can be enough to win you the house in multiple offer situations. If there are no other offers at first, and then other offers come in after you’ve submitted yours, your agent should follow up with the agent representing the seller and ask if there is anything you can do to sweeten the offer.
For more information about financing a home purchase, check out my blog post, Why Does a Seller Care If I’m Using Cash or a Loan to Buy Their House?