This Week's Q & A

Q: If there are several buyers interested in a property, would our ability to make a larger than average down payment potentially make our offer more attractive to the sellers, even if we’re not offering the highest price?

A: That depends on the circumstances of the sellers, the nature of the competing offers and a whole host of variables that make it impossible to predict how any given seller is going to respond.. But as a general rule, most sellers want to get the highest price possible for their property and will, therefore, be influenced more by the offering price than by any other details of the offer.

Of course, a seller who is providing the financing as part of the deal might well be influenced heavily by the size of the down payment a buyer can make. And if two offers are the same, or reasonably close, the down payment could be a major factor, especially if it appears that the buyer offering the larger down payment has a better chance of qualifying for a mortgage. But if two buyers have equally strong financial profiles and equal prospects of obtaining financing, then most sellers will be far more concerned about the size of the offer than about the size of the down payment.

One negotiating tool that can be very helpful if you’re competing with other buyers for a particular property, is being pre-approved for a mortgage. Most lenders today will sit down with you before you’ve found a property, review and verify all your financial, employment and credit information, and issue an approval agreeing to provide a mortgage up to a specified maximum amount at a specified rate, contingent only on an acceptable appraisal of the property you eventually purchase. That a pre-approval can give you a definite edge over other buyers, because: a) There’s no question about whether you will be able to qualify for a mortgage -- you’ve already gotten the approval; and b) Since you’ve already completed most of the loan process, you will be able to close more quickly than buyers who haven’t yet submitted a mortgage application.

One important point to keep in mind: there is a difference between the pre-approval process I’ve just described, and a “pre-qualification.” Lenders who pre-qualify borrowers simply estimate the maximum mortgage for which they will qualify based on the income they state. That tells you how large a loan you might get, but it provides no assurance that your application actually will be approved when the lender gets around to verifying all your financial data and checking your credit history. A pre-approval is a loan commitment; a pre-qualification is not.