Bidding wars are incredibly common in this competitive market. How does your government, conventional, or jumbo loan affect your chances of getting your dream home?

 

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In this competitive market, bidding wars for homes are very common. There are many factors to consider when positioning yourself to win a bidding war but today, we’ll focus on the best type of loan for you to choose.

 

Most consumers in this market will take one of three loan types: a government loan, a conventional loan, or a jumbo loan. Each comes with advantages and disadvantages.

 

Government loans include FHA and VA loans. VA loans allow honorably discharged veterans to purchase a property with 0% down. FHA loans offer 3.5% down loans for anyone who qualifies. Although most people who use FHA loans are first-time buyers, you do not have to be a first-time buyer to get an FHA loan.

 

Quite frankly, government loans can present certain obstacles during bidding wars. Part of the problem is that when the appraisal is performed, the government will require the seller to make certain repairs. These repairs are non-negotiable, which sellers aren’t too happy about. Another issue is that some sellers view buyers with government loans as weak buyers because they need a lower down payment than a buyer with a conventional loan; however, that is merely a perception issue.

 

 

“
Conventional loans make it a bit easier
to win a bidding war.
”

 

 

It is a bit easier to win a bidding war if you have a conventional loan from Fannie Mae or Freddie Mac. You need a higher credit score to get a conventional loan and you have to make a higher down payment, so many sellers will think you are more likely to complete the transaction.

 

Jumbo loans don’t give you a lot of trouble during multiple offer situations. If you qualify for a jumbo loan, you are probably looking for a large home well over $500,000. Jumbo loan buyers are typically very strong and have large down payments. Another benefit is that in the jumbo loan segment, there are fewer multiple offer situations because there are fewer buyers looking at that price point.

 

If you would like to know more details about these different types of loans, give us a call or send us an email. We would be happy to help you!