The subject of mortgage pre-approvals has been beaten to death, but I am going to circle back to this from a different perspective.
Over the last few months I’ve run into several situations where clients have reached out with an accepted offer in hand but have not done their homework with respect to arranging their financing. Sometimes this is not an issue, but sometimes it is.
For everyone involved in a real estate transaction there is a fair bit at stake.
For your realtor, there are countless hours spent preparing and taking you to listed properties. This can involve hours and hours, sometimes over many months, of research, coordination, and travel. When you do find a property that you want to write an offer on your realtor spends a great deal of time preparing and negotiating your offer.
For the listing realtor, there is time spent back and forth with their client and the realtor representing the potential purchasers in addition to the time they have already spent working with the sellers getting ready to list their home.
For both realtors there is much that goes on behind the scenes to make an offer come together. Once a seller has an accepted offer, their home is tied up while they wait to see if you have your financing approved. They may already have an offer on another home so are making plans and spending money on inspections and appraisals for their own potential move. They are also likely excited about their upcoming move and are spending time coordinating everything from new schools or daycare to home insurance and utility hookups.
There is you. You have spent hours watching Realtor.ca and scouring listings to find your next home. You have explored potential neighbourhoods and spent days checking out possible homes. You have made arrangements to move and are excited about the home you’ve found.
Then there is your mortgage person. I love what I do, and feel a great deal of satisfaction when I can find a lender for a complicated situation. Complicated situations take hours and hours of time and research to find suitable (and palatable) solutions. Each application and client is slightly different, and lenders have adapted to offer a wide range of mortgage products to suit most situations. However, sometimes just because we are able to find a mortgage approval for you does not make it wise to move forward with a purchase.
Lenders have different criteria and programs. Most are looking for a few basics to be in place:
• Are you working consistently?
• Have you paid your previous credit facilities on time and as agreed?
• Do you have a down payment organized?
Mortgage options can change based on the answers to these questions. There are a few other things that are important:
• Have you been bankrupt in the past? Are you discharged from your bankruptcy?
• Do you have any spousal or child support payments?
• If your income is casual or commission-based, do you have a two-year history?
If you have not done your pre-work and it's been a while since you last applied for a mortgage you may be shocked to learn that you don’t qualify for as much as you used to. You might be horrified to know that even with 20% down, the only option we can find is a private lender. You may not be able to wrap your head around the fact that your financing team cannot find a suitable option because of a written-off fine that you thought was not big deal. It is heartbreaking to learn that you don’t qualify for the mortgage you need.
I cannot stress enough the importance of doing your homework to have your financing lined up before you start shopping. I also cannot stress enough the importance of full disclosure with your mortgage person. Sharing any of the skeletons in your closet can help us get ahead of any problems they may cause.
I really take it to heart when I can’t find a suitable option for good people. I want to set my clients up for long-term success and make sure I am not setting them up for disaster or disappointment.
I do love spending as much time as needed educating my clients and helping them prepare so that when they are ready to move forward we find a great mortgage product for them.
On a different note, if you are a homeowner, you should have your 2023 tax bill by now. Make sure you read the form and claim your Home Owners’ Grant.
If this is your first year in your home and your lender is collecting your property taxes for you, check the upper right corner of your tax notice to make sure it shows your lender. If not, reach out to your mortgage lender (or broker if you worked with one) to make sure the lender is paying your property taxes as agreed.
Every once in a while there is a disconnect and it is far easier to sort out ahead of time as opposed to when you get a notice in August that your property taxes are owing.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.