You’ve found a home you want to buy. Now you’re ready to make an offer.
This is where the excitement of house hunting meets the financial side of buying a home. Before you decide what to offer, it’s important to understand not only what may make an offer competitive, but also how that offer can affect your financing, monthly payment and cash needed to close.
Your real estate agent can help you determine how to structure and negotiate the offer. Your mortgage professional can help you understand the financial side of the decision.
The more you understand before you submit an offer, the more confident you can be moving forward when the right home comes along.
What Does It Mean to Make an Offer on a Home?
Making an offer on a home is a formal proposal to purchase a property under specific terms.
Your real estate agent typically prepares and submits the offer to the seller or seller’s agent. Depending on the transaction, an offer may include:
- Purchase price
- Earnest money
- Financing terms
- Proposed closing date
- Inspection provisions
- Appraisal provisions
- Other contingencies
- Requests for seller concessions or other terms
The seller can accept the offer, reject it or respond with a counteroffer.
Once an offer is accepted, you’ll generally move into the contract-to-close process. That’s when your mortgage team becomes especially important as you work through the financing, appraisal, underwriting and closing process.
But your mortgage professional’s role starts before you submit the offer.
Start With What You Can Afford
One of the biggest mistakes buyers can make is focusing only on the home’s purchase price.
Before making an offer, you want to understand what that price means for your overall finances.
Your monthly housing costs may include:
- Principal and interest
- Property taxes
- Homeowners insurance
- Mortgage insurance, if applicable
- HOA dues
- Other property-related expenses
You also need to consider the cash you’ll need upfront for your down payment, closing costs and other prepaid expenses.
That’s why your maximum loan qualification and your personal comfort level aren’t necessarily the same number.
Your mortgage professional can help you look at different purchase prices and understand how they may affect your estimated monthly payment and cash needed to close.
The goal isn’t simply to know how much you can borrow. It’s to know what purchase price makes sense for you.
Know Your Financing Before You Write the Offer
When you’re ready to make an offer, you don’t want to be figuring out your financing at the same time.
Working with a mortgage professional early can help you understand your financing options and establish a realistic price range before you begin making offers.
A pre-qualification can give you a better understanding of your potential purchasing power and help you move more quickly when you find a home you want.
It can also give your real estate agent the information needed to help you structure an offer.
Keep in mind that a pre-qualification is not a commitment to lend. Final loan approval is subject to the complete application, documentation, property, and underwriting requirements .
How Much Should You Offer?
There isn’t one number or formula that determines the right offer price.
Your real estate agent can help you evaluate the property’s market position, recent comparable sales and current competition.
But once you have an offer price in mind, your mortgage professional can help you understand what that number means from a financing perspective.
For example, changing the purchase price can affect:
- Your loan amount
- Down payment requirements
- Estimated monthly payment
- Mortgage insurance, if applicable
- Cash needed to close
- Potential financing options
That makes it important to look at the offer from both sides: Does it make sense for the property, and does it make sense for your finances?
Don't Let Competition Push You Beyond Your Budget
A competitive market can create pressure to increase your offer.
You may hear that other buyers are interested. You may be tempted to offer more than you originally planned. You may even find yourself thinking, “It’s only a little more each month.”
That’s when it helps to pause and look at the numbers.
Before increasing your offer, ask:
How much will this change my monthly payment?
How much additional cash will I need?
Does the new price still fit comfortably within my budget?
What happens if the property doesn't appraise at the purchase price?
Your mortgage professional can help you run through those scenarios so you’re making the decision with actual numbers rather than relying on guesswork.
Price Isn't the Only Part of an Offer
The highest purchase price isn’t necessarily the only factor a seller considers.
Your real estate agent can help you evaluate terms that may make an offer more attractive, such as:
- Closing date
- Earnest money
- Inspection provisions
- Appraisal provisions
- Financing terms
- Seller concessions
- Other contingencies
From the mortgage side, it’s important to understand how those terms may affect your financing.
For example, if you’re requesting seller concessions toward eligible closing costs, your mortgage professional can help you understand how those concessions may work within your specific loan and transaction.
A competitive offer still needs to work financially.
Understand Your Contingencies
Contingencies establish conditions that must be met for the transaction to proceed under the terms of the contract.
Common contingencies can include inspection, finance and appraisal provisions. The specific terms and protections vary by contract and transaction.
Inspection
A home inspection can help you understand the condition of the property and identify potential issues.
Your real estate agent can help you understand how inspection provisions work within your offer.
Financing
A financing contingency can address what happens if you are unable to obtain financing under the terms outlined in the contract.
Your mortgage professional can help you understand your financing status and what is still required to complete the loan.
Appraisal
An appraisal provides an opinion of the property’s market value for the lender.
If the appraised value is below the purchase price, that can create additional considerations for the buyer and transaction.
Your mortgage professional can help you understand the potential financing implications, while your real estate agent can guide you through the contractual side of the situation.
Don’t waive or change protections simply because you feel pressure to make an offer more competitive. Make sure you understand the potential risks first.
What Is Earnest Money?
Earnest money is a deposit that demonstrates a buyer’s commitment to purchasing the property.
The amount and terms vary by transaction and market.
If the purchase consummates , earnest money may be applied toward the buyer’s closing costs or down payment, depending on the transaction.
What happens to the deposit if the transaction doesn’t close depends on the contract and the circumstances surrounding the transaction.
Your real estate agent can explain the contractual requirements related to earnest money.
Your mortgage professional can also help you understand how the deposit fits into your overall cash-to-close picture.
What Happens If the Home Doesn't Appraise?
This is an important consideration when deciding how much to offer.
An appraisal is used by the lender to help determine the property’s market value. If the     appraised value is below the agreed purchase price, the difference may affect the financing of the transaction.
For example, if you agree to purchase a home for $400,000 but the appraisal comes in at $385,000, you may need to consider how that difference will be addressed.
The options available depend on the contract, financing and circumstances of the transaction.
Your real estate agent can help you navigate the negotiation with the seller, while your mortgage professional can explain how the appraisal affects the loan.
This is one reason it’s important to understand the financial implications of your offer before you submit it.
Don't Forget About Cash Needed to Close
Your down payment isn’t the only cash you’ll need when buying a home.
Depending on the transaction, you may also need funds for:
- Closing costs
- Prepaid taxes and insurance
- Escrow funding
- Earnest money
- Other transaction-related expenses
The amount you’ll need can vary based on the purchase price, loan program, property, closing date and other factors.
Before submitting an offer, ask your Delmar Mortgage professional for an updated estimate of the cash you’ll need based on the purchase price you’re considering.
That way, you aren’t looking only at whether you can afford the monthly payment. You’re also considering whether you’re prepared for the upfront costs of purchasing the home.
What If the Seller Counters Your Offer?
A seller doesn’t have to accept your initial offer.
They may reject it or respond with a counteroffer that changes the purchase price, closing date, concessions, or other terms.
Your real estate agent will help you evaluate and negotiate the revised terms.
If the purchase price or other financial terms change, your mortgage professional can help you understand how those changes affect your financing.
This is particularly important if you consider increasing your offer.
Before agreeing to a higher price, make sure you understand the impact on your monthly payment and cash needed to close.
Questions to Ask Your Mortgage Professional Before You Submit an Offer
Once you find a home, it’s a good idea to connect with your mortgage professional before submitting the offer.
Consider asking:
What will my estimated monthly payment be?
Make sure you understand how the purchase price translates into an estimated monthly housing payment.
How much cash will I need to close?
Ask about your down payment, estimated closing costs and other funds that may be required.
Will changing my offer price affect my financing?
If you’re considering offering more or less than originally planned, ask how the change could affect your loan amount, payment and cash requirements.
What happens if the appraisal comes in low?
Understanding the potential implications before you make the offer can help you avoid surprises later.
Are there financing considerations with the terms I'm requesting?
If you’re considering seller concessions or other terms that affect the financing, discuss them with your mortgage professional before submitting the offer.
Is my pre-qualification still accurate?
If your financial circumstances, purchase price or desired loan structure has changed, your mortgage professional can help determine whether updated information is needed.
Common Mistakes to Avoid When Making an Offer
Focusing Only on the Purchase Price
The purchase price is important, but it doesn’t tell you the full cost of owning the home.
Stretching Your Budget Because of Competition
Competition can be intense, but you don’t want a winning offer to become a financial burden.
Forgetting About Cash to Close
Make sure you understand how much money you’ll need upfront—not just the down payment.
Waiting Until After the Offer to Talk About Financing
If you wait until your offer is accepted to discuss major financing questions, you may lose valuable time.
Waiving Protections Without Understanding the Risks
A more competitive offer isn’t necessarily a better offer if it exposes you to risks you aren’t comfortable taking.
Assuming the Asking Price Is Your Budget
The seller’s asking price and your comfortable purchase price are two different things.
Your Real Estate Agent and Mortgage Professional Have Different Roles
Buying a home involves multiple professionals, and each one brings a different area of expertise.
Your real estate agent can help you:
- Evaluate the property and market
- Determine an offer strategy
- Structure and negotiate the offer
- Navigate contract terms
- Communicate with the seller’s agent
Your mortgage professional can help you:
- Understand your financing options
- Evaluate your estimated payment
- Determine potential cash needed to close
- Understand how the purchase price affects your loan
- Navigate financing-related questions
- Prepare your loan for the closing process
The two roles work together to help you move from finding a home to financing and closing on it.
Making an Offer on a Home: Buyer Checklist
Before you submit your offer, make sure you understand:
- Your comfortable purchase price
- Estimated monthly payment
- Down payment requirements
- Estimated cash needed to close
- Your current pre-qualification status
- How the purchase price affects your financing
- Current market conditions and comparable sales
- Inspection provisions
- Appraisal provisions
- Financing provisions
- Earnest money requirements
- Proposed closing date
- Seller concessions or other requested terms
- What happens if the appraisal comes in below the purchase price
Frequently Asked Questions About Making an Offer on a Home
How much should I offer on a home?
The right offer depends on the property, comparable sales, current competition, market conditions and your financial situation. Your real estate agent can help you evaluate the property and determine an offer strategy, while your mortgage professional can help you understand the financial impact of the purchase price.
Should I offer the asking price?
Not necessarily. The asking price is one factor to consider. Your real estate agent can help you evaluate the home’s market position and comparable sales to determine an appropriate offer strategy.
Should I offer more than the asking price?
It depends on the property and market. Before increasing your offer, make sure you understand how the higher purchase price could affect your monthly payment, cash needed to close and financing.
What happens if the home doesn't appraise for the purchase price?
A low appraisal can create financing and contractual considerations. Your real estate agent can help you understand your options within the purchase contract, while your mortgage professional can explain how the appraisal affects the loan.
Should I talk to my lender before making an offer?
Yes. Understanding your financing before submitting an offer can help you make a more informed decision and move quickly when you’re ready to buy.
Does a pre-qualification guarantee my mortgage?
No. A pre-qualification is not a commitment to lend or a guarantee of final loan approval. Final approval is subject to the complete application, documentation, property, underwriting requirements and other applicable factors.
What happens after my offer is accepted?
Once your offer is accepted, you’ll generally move into the contract-to-close process. This may include inspections, appraisal, loan processing, underwriting, final approval and closing. Your real estate agent and mortgage professional will each guide you through their respective parts of the process.
Make Your Offer with Confidence
Making an offer on a home can feel like a major decision. The key is to make sure you’re looking at the decision from more than one angle.
Your real estate agent can help you understand the property, market and contract. Your mortgage professional can help you understand what the purchase price and offer terms mean for your financing.
Before you submit, know your numbers, understand your financing and make sure the offer fits your overall financial plan.
That way, you’re not simply making an offer you hope will be accepted. You’re making an offer you can feel confident carrying through to closing.
This is not a commitment to lend. Buyer must meet certain qualifications for this program.
