Friday, 3 September 2021

Why you need a financing condition

Whether it is in the heat of competition or just confidence in your financing, you might be tempted to remove or not include a condition on financing.  You're pre-approved by the bank, so you should be fine right?

Maybe, but not necessarily.

Unless you're buying the house all cash and don't need a mortgage at all, you might want to re-consider your decision not to include a financing condition, and here are a few reasons why.

1. Are you properly pre-approved?
Most independent mortgage brokers will get all the information they need and do a proper credit report when pre-approving you.  Big banks, however, will often not thoroughly discuss income and debt not reported on credit reports, and sometimes base your pre-approval on your history with them without even doing a full credit report up front. Obviously, this can lead to some troubling reversals after an offer is made and submitted for financing and they see something they don't like on your full credit report or financial information.  And even if you're the poster child for fiscal responsibility, no system is perfect and there could be errors on your credit report which will need to be address and fixed - a process that can take time.  I've seen this happen.  Fortunately, a mortgage broker caught it while doing a pre-approval, and the client was able to first get it resolved before proceeding to shop for a house.  That would have been a very stressful time if they had already bought a house and couldn't close.

2.  Discrepancies between credit reports
Similar to the surprise of errors, there can also be discrepancies between one report and another.  I have seen a full and proper pre-approval done on a client.  Then when the offer was submitted, a credit issue still came up.  Why?  The broker pulled a report from one of the major Canadian credit reporting companies and it showed clean.  The lender, however, pulled a report from the OTHER major credit reporting company, and there was an old credit issue that had fallen off of the first report but was still reported there.  It was enough to disqualify them from financing and they didn't have a lot of options for lenders at the time.  It could be differences in the time the company keeps an item on your history, or it could be an error on one not showing on the other.  But either way, there could be a discrepancy between one report and another that leads to problems.

3.  Sometimes "appraisals go bad"
Even if everything is okay for the qualification and the bank wants to lend you a million dollars, the mortgage appraisal may come in lower than expected.  If the mortgage company feels the property is worth less than you have offered, they will only give you a mortgage based on that amount.  So as an example, you have offered $700,000 but the lender's appraiser thinks it is worth $550,000, they will give you a mortgage based on $550,000 and you will have to cover the shortfall out-of-pocket.  If you're in a conditional sale, you have options such as trying to negotiate a price reduction or walking away.  But if you don't have the financing condition, you are in a binding contract to close at that price and failure to do so could result in a lawsuit and at the least, the loss of your deposit.  For a bit more on this, visit previous article [ "When appraisals go bad" ].

4.  The property also needs approval
Besides your financial qualification and the appraisal, the lender is going to look at the property itself. They could take issue with any number of things about it from property condition to location. I've seen one lender refuse to approve a purchase in the country because of railroad tracks they felt were too close, and that buyer didn't have a lot of lenders to choose from based on their personal situation.  I've also heard of problems with mortgage insurance cropping up unexpectedly because of a house being a former grow-op - something the buyer couldn't have known but was on record with the insurer!  You never know what might come up.

So, unless they are in a very strong cash position, I always advise my clients to keep some kind of financing conditions if possible, even if they have been pre-approved.  Removing them can be a real risk with some factors beyond your control.

22 comments:

  1. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. Jarvis

    ReplyDelete
  2. You have done a great job. I will definitely dig it and personally recommend to my friends. I am confident they will be benefited from this site. Ativador Office 2019

    ReplyDelete
  3. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. Portia Antonia Alexis Neuroscience

    ReplyDelete
  4. I don t have the time at the moment to fully read your site but I have bookmarked it and also add your RSS feeds. I will be back in a day or two. thanks for a great site. Buy Fake passport Documents

    ReplyDelete
  5. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. 컴퓨터수리

    ReplyDelete
  6. You have a real ability for writing unique content.I like how you think and the way you represent your views in this article.I agree with your way of thinking.Thank you for sharing. reignite reviews

    ReplyDelete
  7. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. anthony jerdine

    ReplyDelete
  8. Great article with excellent idea!Thank you for such a valuable article. I really appreciate for this great information. Oman

    ReplyDelete
  9. Great article with excellent idea!Thank you for such a valuable article. I really appreciate for this great information. lottovip

    ReplyDelete
  10. This is a great inspiring article.I am pretty much pleased with your good work.You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. fn 502 tactical for sale

    ReplyDelete
  11. I like the valuable info in your articles. I'll bookmark your blog and check again here regularly. I'll learn plenty of new stuff right here! Best of luck for the next! Regards Goldshell KD6

    ReplyDelete
  12. If more people that write articles really concerned themselves with writing great content like you, more readers would be interested in their writings.Thank you for caring about your content. MyCCPay

    ReplyDelete
  13. Wow! Such an amazing and helpful post this is. I really really love it. It's so good and so awesome. I am just amazed. I hope that you continue to do your work like this in the future also. Mega888 tumblr

    ReplyDelete
  14. Thanks for this great post, i find it very interesting and very well thought out and put together. I look forward to reading your work in the future. ยูฟ่า

    ReplyDelete
  15. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. ufabet

    ReplyDelete
  16. Thanks for writing such a good article, I stumbled onto your blog and read a few post. I like your style of writing. drawing ideas

    ReplyDelete
  17. Thank you sir. This is very good post.
    https://asrov.com/car-parking-multiplayer-apk-download-2021/

    ReplyDelete
  18. โปรมาใหม่ สำหรับทุกคน สมัครเล่นเกมใหม่ที่นี่ เราอัพเดทเกมใหม่ล่าสุด 2022 ศูนย์รวมโปรสล็อตใหม่ล่าสุด สมัครสมาชิกฟรีเครดิต เข้าเล่นเกมฟรีก่อนใคร

    สมัครสมาชิกเล่นสล็อตออนไลน์ที่นี่ ทางเข้า slot มือถือ ิคลิ๊กที่นี่เลย
    รวมโปรสล็อตสมาชิกใหม่ มากมาย อัพเดทโปรโมชั่นมาใหม่ ที่ตอบโจทยืนักเดิมพันทุกท่าน มากกว่าเดิม รับเครดิตฟรีมากมายที่นี่


    รวมโปรสล็อตถอนไม่อั้น เล่นได้ตลอด 24 ชั่วโมง สามารถเล่นได้บนมือถือ ทุกรุ่น ทุกระบบ ทั้งระบบ android, IOS หรือจะสามารถเล่นผ่านคอมพิวเตอร์ เว็บไซต์ได้เช่นกัน

    ReplyDelete
  19. Love to read it,Waiting For More new Update and I Already Read your Recent Post its Great Thanks. OKBET

    ReplyDelete