Homebuyers in Brampton, Toronto and the GTA often ask me what they need to think about when making an offer on a home. My answer is always – when you find the condo or house of your dreams and want to make an offer, make sure you have a financing condition, which tells the seller that your offer to buy their home is conditional on you obtaining mortgage financing. Unless you can pay cash for the home, having this condition in place is an important protection for you.
When your offer to purchase is made “conditional on financing”, we gain the time needed to ensure that you are fully approved for the mortgage you require. This is necessary even if you had a preapproval.
Once I submit your mortgage application, you need to collect all the necessary documents and there is often back and forth communication with the lender. It can take a few days i.e. 5 to 7 days to get your mortgage commitment at which point I will advise that you can waive your financing condition.
Your lender needs to feel as comfortable about the property as you do and will likely conduct an assessment. After all, the property is the lender’s security if something goes wrong. The lender may decline the property if they uncover issues like title defects, an environment or zone issue, or past illicit activity like a grow op. Or the appraisal may come in lower than your offered price.
Don’t let the rush to buy overcome common sense. A preapproval is a guideline only, and a lender could disregard it: especially if your income or financial situation has changed. That “conditional on financing” gives you time to confirm with the lender, and to withdraw the offer if the lender’s queries turn up something negative about the house.
Making sure you have a financing condition is like wearing your seatbelt. You are incredibly grateful that you are wearing it that rare time you end up in an accident. You don’t always need it, but when you do, you really need it!
An offer without this condition leaves you on the hook. If the financing falls through, you will lose your deposit, and could be sued by the seller. The seller has a strong case because when you signed the agreement unconditionally, you are legally required to buy the property even if your financing doesn’t come through. It won’t be the happily-ever-after picture you envisioned when you made your offer. No one wants to be vulnerable to these kinds of legal and financial risks.
If you really want to put in an offer with no financing conditions, even though I don’t recommend it, I might be able to help mitigate your risk i.e. review any strata docs, listing information, and contact the lender and insurer about the property before you put in your offer, which can help eliminate some of the risk but nothing can be 100% guaranteed.
If you are looking to buy in Brampton, Toronto or the GTA, get in touch as early in the process as possible. I am here to give you all the information you need on downpayment, credit, mortgage qualifying and important homebuying musts like having a financing condition. My goal is to ensure that homebuyers in Brampton, Toronto and the GTA can achieve their dreams for homeownership and financial security.
