3 Tips for Surviving and Thriving Without Conditions of Financing
Current market conditions are such that offers with fewer conditions tend to be more successful. In other words there in an inverse relationship between the number of conditions and likelihood of success. One of the conditions that buyers often drop is that of financing. Dropping a financing condition exposes you to legal risk if the financing falls through and you are unable to complete the transaction. This is all to the seller’s benefit. As a buyer, you are in a difficult bind where the only way to be successful is to potentially expose yourself to legal jeopardy.
Borrower Pre-qualification
Fortunately, it is possible to minimize the risks of your financing falling through by working with a mortgage broker such as myself. First-up, I will make sure that you are fully pre-qualified by collecting all of your income, employment, and down payment documents upfront. I will also pull a credit bureau to establish a purchase budget with you. If necessary and possible, we can explore options to restructure any existing debts, or bring on a cosigner.
As a general rule, banks do not spend a lot of time on this initial process. The bank will often simply consider your stated income and come up with a budget figure. I have seen this many times result in surprises in the weeks just before closing. In contrast, I am able to get you a written pre-approval commitment from a lender. Some of the lenders with whom I work will underwrite the file and double check my math and verify your documents. This written pre-approval helps to strengthen your offer. If your offer is successful, the lender can quickly issue a commitment and sign-off on the conditions without the need for more documents
Property Pre-clearance
The second potential pitfall is the property itself. I work with you and your realtor and pre-clear any properties in which you are interested. I vet the property with both the lender and, the mortgage default insurer. (In Canada, any mortgage with less than a 20% down payment requires mortgage default insurance). If any of these properties have red flags on the lender side,I’ll let you know and you can steer clear of them. Red flags would be things like asbestos, former grow-op or even foundation issues. The end result is that the lender pre-clears both you and the property.
Appraisal Contingency Plans
Finally, I work with you to ensure that you have contingency plans. When offering more than asking, it is possible that the lender or the insurer will ask for an appraisal. We draw up a plan to make up any difference in the unlikely event that the property appraises at a value lower than that of your offer.
Peace of Mind
Together we identify and minimize these potential pitfalls in the financing of a new home. You will be able to decide to present a successful offer that will grant you peace of mind. You can have the confidence to present a strong offer that is as robustly backstopped as possible. We will have the necessary documents collected so your mortgage will fund on-time.