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Offer to Purchase Overview

Offer to Purchase Overview

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru
  • Once you have identified the home you want to buy, you submit an Offer to Purchase, a document that outlines the key terms of your proposal to purchase the property. The most important item in the Offer to Purchase is the proposed property purchase price but you also disclose the proposed down payment and loan amount so the document impacts the mortgage process as well.

    The seller reviews the terms of your offer and compares it to other potential buyers.  While purchase price is usually the most important criteria, property sellers also consider other personal and financial criteria for potential buyers.  If you are making a large down payment, the seller may want to understand the source of your funds.  If you need a large mortgage, the seller may confirm that you are pre-approved or can qualify for the loan.

    The seller wants to be confident that the transaction will close with the buyer he or she selects. If the seller accepts your Offer to Purchase then you are under contract to purchase the property and the next step is submit your loan application and for the lender to process mortgage. The Offer to Purchase typically expires after a set period of time – typically 30 to 60 days from the date your offer is accepted by the seller – so you want to make sure you can close your mortgage within that time period.

    This is why it is important to select your lender and get pre-approved for your mortgage before you select a real estate agent and find the property you want to purchase – so that the buyer knows you can afford, and are pre-approved for, the mortgage you are proposing in the offer to purchase. Being pre-approved adds validity to your Offer to Purchase and the added certainty that your mortgage will close can make your offer more attractive if there are multiple bidders for the property.  In short, home sellers want to make sure that your offer is real and actionable.

    Use our free get pre-approved form to get approved and compare loan terms for leading lenders. The form is easy-to-use, no obligation and does not impact your credit. Getting pre-approved enables you to submit home purchase offers with confidence and helps your offer stand out.

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  • As a buyer you also want to feel confident in the property purchase terms you are proposing.  You want to make sure the purchase price reflects the fair market value of the property for several reasons.  First, nobody wants to overpay for a home.  Second, if the property purchase price is significantly higher than the market value of the property, this can create an issue when you apply for a mortgage.  If the actual property value is lower than the agreed upon purchase prices you may be required to make a larger down payment to qualify for your mortgage.  Buyers should work with their realtor or real estate agent to make sure they submit a competitive but fair and reasonable offer for the property.

    The Offer to Purchase is also important because your lender reviews the document when you submit your mortgage application.  The lender wants to understand the terms of the purchase, how much you are putting down and what size mortgage you need.  The offer to purchase may also provide summary information about the property, including the address, that the lender uses.  The lender also wants to understand the length the Offer to Purchase is valid for so they know how long they have to process and close your mortgage.  Lenders want to make sure that they can fund your mortgage within the required time frame so that they do not delay the mortgage process.

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  • Sources

    REALTOR Forms: https://www.nar.realtor/forms/forms-for-realtors

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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