You would be wise to consider how your offer may be perceived by the sellers. Since most of us can’t pay all cash for a home the type of mortgage you intend to use may greatly affect that perception. If you are in a seller’s market like in the Plano real estate market you would also likely to be competing against multiple offers from various types of buyers. If this is the case your offer will be even more closely judged and scrutinized.
There are Fair Housing Laws that prohibit discrimination based on protective classes but other types of discrimination are not restricted like “source of funds”. Most sellers and their Realtors don't make it a practice of telling buyers why their offer was rejected. They are not required to explain why. It is common practice to judge a purchase offer by the type of financing the buyer chooses to obtain to complete the purchase. Purchase offers for DFW homes are often ranked as follows. The best type of offer is listed first, with the least attractive offer ranked in last place:
Cash: This is cash on hand that the buyer has in a savings account for example. A cash offer is typically accompanied by proof of fund. Because cash is so highly rated, sometimes cash buyers are able to negotiate a discount, a price less than that of a buyer who is going to obtain a mortgage. But don't count on that being the case every time. Remember that all offers, except owner financing, result in cash to the seller at closing. The main benefit to a cash offer is that there are no underwriting restrictions to deal with.
· Conventional Mortgages: A buyer’s FICO score requirements for a conventional mortgage are higher than those for an FHA mortgage. You can still get a conventional mortgage buy Collin County homes if your FICO score is the same as the minimum required for FHA but you will pay a little bit higher interest rate. Preferred interest rates are available to borrowers who put down 20% or more in cash, resulting in an 80% loan to value ratio or less. The lower the ratio, the lower the risk is to the lender. If the appraisal comes in lower, often the lender will let a borrower pay the difference in cash but on if the loan to value is less than 80%. Another advantage to using a conventional mortgage is that lender funding requirements are much less stringent.
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· FHA Mortgages: Many first time home buyers go for an FHA mortgage because the initial down payment is generally less than the amount required for a conventional mortgage. Also, the FICO score requirement is much more lenient. The minimum down payment for an FHA loan is 3.5% of the purchase price. FHA repair guidelines are not as strict as some sellers and Realtors believe. But some older homes tend to need more repairs. Peeling paint is a huge issue if the home was built prior to 1979 due to lead based paint concerns. The home can have a concrete floor without carpeting, but it better not have peeling paint. FHA loans are sometimes held up from closing due to funding conditions. A termite report and clearance may be required by the FHA appraiser.
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· VA Mortgages: Unfortunately, military veterans get the short end of the stick when it comes to competing for a home. VA borrowers are generally a better credit risk than an FHA buyer because the requirements to buy without a down payment are much more stringent. A mortgage borrower retains the option to put a down payment into the home or buy without a down payment. Most VA borrowers choose the zero down payment option. The downside to a VA mortgage is that termite reports are required. Due to the mortgage hierarchy and misconceptions, VA buyers many times fall to the bottom of the offers even when they might be the most qualified. Realtors who handle a lot of short sale transaction usually to prefer VA buyers because they know these buyers will get turned down elsewhere, which makes them a committed candidate for a short sale home.
