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They aren't holding cash. What they are doing is accepting the risk of not being able to finance the property. They're risking the 1% earnest money, but feel

They aren't holding cash. What they are doing is accepting the risk of not being able to finance the property. They're risking the 1% earnest money, but feel it's low risk because they have a good relationship with a bank or know they have good credit. As for people selling and moving into a new house? Again, they're accepting the risk that they will be able to get bridge financing and sell their existing house. Conditions have monetary value to both the purchaser and the seller. If you are losing out to people with clean offers, bump your offer by 5% and you'll find that sellers will wait another 2-4 weeks for their money. That's what I had to do to get a house in San Jose (just moved in!). It's the same as the "discount for debit cards and cash" you can get in electronics stores. Get a good real-estate agent that _knows_ the area, and listen to what they say the house will sell for. Ours was spot-on 100% of the time. Next, you need to realize at what points in the sale the power in the relationship changes. Up to offer acceptance? The seller has the power, so offer more money to keep contingencies on the sale. After acceptance power starts to shift to the buyer. Here in California building reports are attached to the house, so a bad foundation is information everyone gets. This means the seller is likely to negotiate the price down or fix things if a bad report comes in. Of course, you have to spend $$ to find that out, and your mortgage application fees are then throw-away, so... Finally, be honest about what you can afford. If you're not at the tippy-top of your price range, you will be able to stretch just a little bit to get that really sweet house you want.

tostitos1979 11y ago
Thanks for you thoughts. The challenge we're facing is whether the Mrs will do stay-at-home while the baby is young or not. If it is just my income, I know we'll have to stretch for a house we want. If we have both incomes, net of childcare, we should be okay. Canada has 5 year mortgage terms. That is distressing me to no end. If interest rates go to 5% in 5 years, we might have huge isues. If I had a 3.75%, 25 year US mortgage, I'd take it in a heart beat. I don't think a US lender will be willing to lend against Canadian property due to exchange rate risks (among other reasons).
- jpollock 11y ago
  It sort of depends on how long you intend to live in a house. For mortgages that are on 5yr terms, look at longer term averages. For example, New Zealand (another market I'm familiar with) is currently running at 4%/yr for a 2yr mortgage and 5.5% for a 5yr. However, for budgeting purposes, most people will budget at 8%/yr, since that's the long-term average. Just to completely freak you out, during the GFC, I hit 12% annual interest. My parents hit 20% during the Canadian inflation crisis of '81. :) Go for the high end, don't be afraid of a smaller house, build up the equity and then move. However, be aware that closing costs are significant, so it's best to amortize them over several years - that's why housing calculators ask how long you will live in a house. Frankly? If you're afraid of 5%, you probably don't want to own a house, or at least, you don't want to own _that_ house.

tostitos1979 11y ago

Thanks for you thoughts. The challenge we're facing is whether the Mrs will do stay-at-home while the baby is young or not. If it is just my income, I know we'll have to stretch for a house we want. If we have both incomes, net of childcare, we should be okay. Canada has 5 year mortgage terms. That is distressing me to no end. If interest rates go to 5% in 5 years, we might have huge isues. If I had a 3.75%, 25 year US mortgage, I'd take it in a heart beat. I don't think a US lender will be willing to lend against Canadian property due to exchange rate risks (among other reasons).

jpollock 11y ago
It sort of depends on how long you intend to live in a house. For mortgages that are on 5yr terms, look at longer term averages. For example, New Zealand (another market I'm familiar with) is currently running at 4%/yr for a 2yr mortgage and 5.5% for a 5yr. However, for budgeting purposes, most people will budget at 8%/yr, since that's the long-term average. Just to completely freak you out, during the GFC, I hit 12% annual interest. My parents hit 20% during the Canadian inflation crisis of '81. :) Go for the high end, don't be afraid of a smaller house, build up the equity and then move. However, be aware that closing costs are significant, so it's best to amortize them over several years - that's why housing calculators ask how long you will live in a house. Frankly? If you're afraid of 5%, you probably don't want to own a house, or at least, you don't want to own _that_ house.