In a competitive market, making an offer above the asking price might be the best path to secure your dream home.
We’ll review what you need to know to make an above-asking price offer to stand out to a seller when you should and shouldn’t do so, how to determine your budget, and tips to make your offer stand out.
Purchasing a home is a life-changing experience, and we want to help make yours as efficient and pain-free as possible.
How much above the asking price should I offer?
If you’re considering buying a home and want to make an impressive offer to stand out to the seller, how much should you offer?
Many experts recommend offering at the very least between 1-3% more than the home’s asking price if you’re bidding against other offers.
That means if you’re looking at a home on sale for $250,000, you should consider offering at the very least $252,500.
Purchasing a home is a significant investment and involves many steps, but you don’t have to do it alone.
When you should and shouldn’t offer above the listing price
When you should and shouldn’t offer above the price it’s listed for largely depends on the trending housing market.
A few things you should research before you submit an above-asking price offer include:
- What type of housing market you’re in
- What the trending interest rates are
- The value of nearby homes
Sometimes, an offer above the asking price isn’t necessary. For example, in a buyer’s market, buyers have the advantage as more homes are available than there are offers.
In a seller’s market, there are more buyers than homes available.
If you’re in a seller’s or competitive housing market, you should consider making an above-asking price offer on a home.
If you’re in a buyer’s market, you may be able to settle on a lower price and save money.
Another factor to consider if you should or shouldn’t make an offer above the asking price is the trending interest rates on home mortgages.
If you’re making an offer above the asking price, you’ll have to take out more for a mortgage. Furthermore, if interest rates are trending higher, you’ll be paying even more money overall.
That’s not to say the interest rate should deter you from purchasing a home—a loan officer can review your credit scenario to see what type of interest rate you’d be eligible for.
The value of nearby homes can also help you navigate if you should or shouldn’t make an offer above the listing price. Research what other homes are going for to see if making an offer above the asking price is even worth it.
If other homes seem valued at a higher amount, then it may be in your best interest to make an offer that would stand out in a bidding war.
If other homes in the surrounding area are valued at a much lower price, you may have room to negotiate with the seller.
Check your mortgage optionsHow to determine your maximum home-buying budget?
You can run a few calculations to get a better picture of your budget and your limits.
One of the two major costs you should consider when you purchase a home is a down payment and closing costs.
The down payment is the amount of money you pay upfront for your home.
Most mortgages require a down payment, but there are some mortgages, like the VA mortgage, where you don’t have to put anything down.
As a general rule, the more you can put down on a home, the better offer you’ll receive on a mortgage.
Closing costs
Another cost to consider is the closing costs on your mortgage.
Closing costs can include:
- Appraisal fees
- Mortgage insurance
- Fees for federally-backed loans
- Title-related fees
Once you know what you’ll be paying in terms of a down payment and closing costs, you can dive into your income and financials.
The 28/36 rule compares your overall debt to income to a potential mortgage. In doing so, you get a good picture of how much you can afford.
The 28 represents spending only 28% of your monthly income on your home. When you do this calculation, you’ll want to include the monthly mortgage payment, interest, and insurance.
The 36 represents how much of your income should be spent on monthly debt, like your monthly mortgage payment, personal loans, credit cards, and auto loans.
The idea is that 36% or less of your monthly income should go to your monthly debt.
When running these calculations, a monthly mortgage calculator can provide an accurate estimate of what you can expect in your total monthly mortgage payment and your interest and insurance costs.
Once these numbers are sorted, and your financials are understood, you can set a budget and determine how much above the asking price you can offer.
Other ways to get your offer on a house accepted
We have a couple of tips to help secure your offer on a home.
One way to stand out to a seller is if you make an offer on the home as-is.
No repairs are necessary to close on the home when you purchase a home as-is. This can expedite the buying process and get you in your home faster.
A local real estate agent should be able to help you put together a successful offer and negotiate with the seller and their agent.
Another strategy to get your offer accepted is by getting pre-approval from a trusted mortgage lender.
A pre-approval is a big deal for sellers as it shows there wouldn’t be any unexpected delays or issues when you purchase the home.
When you get pre-approval, a loan officer reviews your financial scenario and provides a letter stating how much you would be approved for.
If you work with the right lender, they can offer their assistance and guidance every step of the way.
Get pre-approved with GO Mortgage
From getting preapproved for an offer above the asking price to closing on your new home.
GO Mortgage has many loan products with flexible requirements that enable home buyers to purchase their dream home.
Fill out our short questionnaire to speak with one of our qualified and trusted loan officers today.
Photo by Thirdman