Making an Offer that is Conditional
on Financing
Pre Qualified or Pre-Approved?
By Tracey Davies, Sales
Representative, ABR, CRA
Re/Max
Centre City Realty Inc & Tri County Appraisal
March 31, 2017
Home buyers don't really want to spend time figuring out what
to do for a mortgage. They would rather
be out looking at new listings or visiting open houses! Getting a file folder
of important documents ready now will make the mortgage application process a
breeze. Get it started today!
The access to the internet, pre qualification apps, mortgage
calculators and easy access to competing mortgage companies has changed the way
buyers shop for a mortgage. In fact,
even using the term "shop" for a mortgage is a relatively newer
concept....buyers prior to 1990 would more than likely use the phrase,
"ask" for a mortgage.
This change in how buyers interact has resulted in the
financial industry also making changes to their normal procedures.
It is really tough these days to get a preapproval for a
mortgage. A pre-approval takes time and documents and signatures. The buyers don't want provide the documents
required and they don't want to wait for a week for a pre-approval to come back
from the head office. The financial industry has had to come up with a way to
get good information in front of their potential borrowers quickly. They need to offer something of value to
potential buyers who are window shopping. The lenders came up with a new concept
...."pre-qualification".
The pre-qualification will ask a buyer a list of basic
questions. Many buyers will soft shoe
the truth when answering these questions. They want to make sure the banker
only has good news about them. And in
turn, the banker does not want to lose them as potential clients, so the really
tough questions are not asked at this pre qualification stage. Unfortunately, like a first date, the
skeletons stay in the closet....for now.....
Get out a file folder today and start filling it with your
important documents. This information is
going to be needed eventually. The
pre-qualification may seem easy but it is just the first date. Before the bank will really lend you any
money, they will know everything there is to know about your finances -- past
and present. Even financially established
parents who co-sign for their children will need to provide documents. It is not hard work but it is time
consuming; and you might as well get started.
They are not going to make an exception for you --- even if you are a
VIP with your local bank.
Sooner or later you will need the following information:
·
Photo ID (photo
copy your driver's license, Ontario ID Card, or Passport ---- not a health
card)
·
A record of employment income such as a paystub,
T-4 slip or a personal income tax return
·
if you are self-employed, at least two years of
Personal Income Tax Returns and Financial Statements. 4 years is likely better to show consistency
in your income.
·
A letter from your employer stating the length
of employment and current salary (3
years minimum at your current employer is best but exceptions are made when an
employee switch companies but doing the same work or promoted to a higher level
in the same field of work)
·
If you are on a contract, have your employer
include in the letter that it is normal hiring practices for your company to
maintain a certain number of positions through contract employees. The contract employment situation is becoming
more common and lenders are starting to adjust their lending policies to
recognize that it is an employment model typical for certain sectors and
industries.
·
The account numbers and locations of your bank
accounts and investments
·
Proof
of assets (photocopies or pictures of ownerships, statements, insurance
records, deeds)
o
Vehicles
o
Boats
o
Investments and interest income
o
Retirement savings accounts
o
Collections Such as Jewelry and Art
o
Other real estate holdings --- cottages, shared
real estate, inheritances, etc
·
Proof
of liabilities (statements, invoices,
o
Existing mortgages
o
Credit card balances
o
Car loans
o
Student loans
o
Lines of credit
o
Co-signed or guaranteed loans
o
Liens
o
Child support
Today's real estate market is competitive and many buyers
are making offers with no financing conditions or very short conditional on
financing clauses because they are competing against other buyers plus they think
they are pre-approved and don't need a financing condition. However, they find out that they do not have
a mortgage secured yet when they take their accepted offer to the bank. Had
they known they were going to have to do all of this paperwork and finding
stuff, they could have started working on it before the stress and panic that
comes along with trying to get an offer accepted. Get it started today. You will be so glad you
did.
My best advice in regard to getting your mortgage approved
in a timely fashion is to go prepared and go early! Get your documentation ready before you make
your appointment. Be the buyer that shows
their banker that they are on the ball, well informed, motivated, organized,
and ready to buy real estate. Tell the
truth now and let your lender come up with solutions while there is lots of
time to figure it out. Give you lender
time to do what is best for you.
There are many mortgage options available and it is
overwhelming trying to decide which is the best for you. Asking family, friends, realtors, and
coworkers who they have had good results with is a tried and true method of
narrowing down your choices.
