Buying a home is very exciting and can also be quite stressful if you have not prepared for the financing part of the deal.
Understanding the process behind mortgage approvals is good information for both a buyer and a seller as it can help speed up the approval process and make the transaction successful.
Real estate agents who work closely with their buyers set a good practice in discovering if their buyer(s) have been pre-approved for their mortgage. Part of this discovery is securing a copy of the pre-approval letter (lenders will often provide them with permission from the buyer) and having a conversation with the lender so there is confidence in going into the market to secure a home for the buyers.
Pre-approval letters are also a great negotiating tool when you get into competing offer situations as the confidence will be stronger for the seller to choose your offer.
It is very important to choose a lender/mortgage broker who works with you in advance with collecting all the needed documents for the mortgage approval, versus one who asks a couple of questions and tells you to go ahead and buy and will look at everything once you have an offer in place. Doing the work in advance will help shorten your condition dates, help you secure the final mortgage approval and save you the grief of not being approved.
Within the many steps of the buying process, you will write an Offer to Purchase and negotiate a deal that moves you into the Conditions of Purchase which ensure you complete your due diligence and secure financing.
The financing condition is one of those vital conditions. It is more than just having your deposit and getting the pre-approval. If a buyer has worked closely with their lender and has submitted all the paperwork required, approval can be quick.
When your lender submits the file for approval, it will reach many hands, including an underwriter who will verify and analyze the information and look at the risk of approving the loan, and, if there is less than a 20-per cent down payment, it will go to a mortgage insurance company like Canada Mortgage and Housing Corporation (CMHC), Sagen (Genworth), or Canada Guaranty.
If any of these organizations find that the risk is too high or discovers something in your credit history that does not meet their requirements, the mortgage can be denied. It is extremely important to disclose all financial matters to your lender so they can guide you to the steps to get your approval or help you plan for a mortgage in the future.
Once the lender, underwriter and mortgage insurance company give their stamp of approval, you will be able to waive conditions and secure the home.
We all work together to achieve successful closings and want to give you keys to your new home. Have the discussions in advance to save yourself time and ensure the offer you make is the one that secures you your new home.
Happy buying and selling!
Crystal Adamo is a Realtor with RE/MAX Rocky View Real Estate.
