by Sandra Rohfrietsch

Let’s talk about financing conditions.

The financing condition is a challenge for everyone purchasing in today’s market.  Everyone wants their offer to be the most attractive, especially when the market that has yet to slow down.  What you may not know, is that there can be some significant factors why your Mortgage Broker or Financial Advisor is pushing you to keep that financing condition in place; they have your protection in mind.  We’re going to look at three main reasons why your financing condition is important:

1. Property – There may be something about the property that you or even your Realtor are unaware of.  Lenders and mortgage insurers (Canada Mortgage Housing Corporation or Genworth Canada) have access to details and information that can make or break the approval.  For example, if the property is built on land in a flood risk zone, or the condo board doesn’t have enough money in their reserve fund, this could lead the lender to deny financing on the home.  These factors are out of your control, but can absolutely affect your ability to buy that home.
2. Value – The lender and insurer have the right to request an appraisal to ensure the value of your home is accurate to the price you have offered.  If that appraisal comes back with a lower value than the purchase price, you have to provide the lender with the difference.  For example, if you purchase for $400,000 but the appraisal comes in at $380,000 you have to come up with an additional $20,000 on top of your down payment.  If you have waived your financing condition, or didn’t have one at all, you’re on the hook.
3. Situation – Something in your situation may have changed.  Buying a home can sometimes be a long process, depending on how far out your closing date is.  While you may have your pre-approval in hand, it is important to maintain your financial situation from application, to closing date.  This applies to your income, and your credit rating.  Changing jobs before closing, or even something like purchasing a new car can impact the approval of your mortgage.  If is important to be upfront with your Broker, as this could put you in a negative situation where you are unable to fulfill your requirements to purchase.

It is very important to remember that once you waive financing conditions, of if your firm offer is accepted, you cannot walk away from that purchase- it’s yours.  If you are unable to satisfy the lender conditions before closing, you risk being sued by the seller.  When real estate contracts are not upheld, the seller is entitled to keep your initial deposit, and can sue you for any and all costs incurred if you decide to walk away.

So, leaving in that condition of financing is worth it- and don’t forget about that home inspection… no one wants the house with mold in the attic.

If you are looking for a new home, or have questions about your existing mortgage, you can contact the Valko Team at 519-745-8019.  Marina is a licensed mortgage agent with The Valko Team – Your #1 Award Winning Mortgage Team!  The Valko Team is located in Williamsburg, at 623-1187 Fischer-Hallman Road, Kitchener.