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Mortgage rules and the return of the financing condition

Friday, December 23, 2016
 
 Eric Rabkin
 
 

                
 

Mortgage rules and the return of the financing condition

Watch the video:  Click Here https://youtu.be/YxbbyZkk01w

Now that we have all the new mortgage rules, it is more important than ever before to include the financing condition in any offer or be otherwise prepared for the consequences.

  1. Pre-approvals are no guarantee you will obtain your financing

Too many buyers are cavalier about submitting offers without a financing condition, especially during the pressure of a bidding war. You must understand that even with a pre-approval, the lender must be satisfied with its own appraisal. The foundation for most appraisals is what would a willing buyer pay a willing seller, WITHOUT pressure? In a bidding war, there is almost always pressure on the buyer. This is why the appraisal will likely be lower than what the buyer offered and the lender will offer you less money than you hoped for. The answer is always to have an extra 5-10% of the down payment in reserve to protect you. In a condominium purchase, if it is conditional upon review of a status certificate, use that time to also make sure your financing is in order.

  1. Lenders can change their mind right up until the day of closing

Even if you are approved after you sign your agreement, the lender can still change their minds based on anything which they may learn before they advance funds. There are usually many conditions attached to any loan approval, such as verification of income, down payment, employment. Make sure you work with your mortgage broker to satisfy all of these conditions and requirements as soon as possible in the process. The worst words a lawyer can hear from a lender on the day of closing is “The file is in underwriting”. This typically means that someone else is reviewing the entire file because issues have arisen. In some cases this can result in the entire loan being cancelled, right on the day of closing. In our firm, since we receive and send funds via wire transfer, we are fortunately able to complete deals even when lenders are late transferring funds to our trust account.

  1. Always know the net amount you will receive from your lender

Every mortgage commitment is different. Some may contain up-front fees for arranging the loan, appraisals, CMHC fees and PST, interest to the interest adjustment date. All of these fees are deducted right off the top, before the balance is sent to your lawyer on the day of closing. The bottom line is you must know the exact amount that will be sent to your lawyer on closing, to make sure you have enough to make up the rest of the down payment, land transfer tax and legal fees. At our firm we remind clients to send us their mortgage instructions early in the process so that we can get them the net amount they will need to complete the transaction in a timely manner.

  1. Get it in writing if buyer wants no finance condition in the Agreement

If the buyer does go ahead and tell you to put the offer in without a finance condition, get these instructions in writing. It is not enough to write the finance condition in the offer and then have the buyer strike it out and initial it. It is better to use a separate form. OREA has form 127 which makes it clear that the buyer is confirming to the buyer brokerage that they understand the risks in making an offer without conditions.

If you have any questions do not hesitate to contact me.


Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529

 

Mark's Contact Information

Mark Weisleder is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or 1.888.876.5529

If you have any stories to share about the GTA housing market or just need some advice, please contact me at mark@realestatelawyers.ca  

Speaking Engagements
 
I have developed a new seminar called "When things go wrong", teaching what to do, say and not say when problems arise in a transaction, so that you are protected from any potential Real Estate Council of Ontario proceeding or legal action.
 
I have also developed shorter 30-45 minute sessions on topics such as multiple offers, Residential tenancies and new home Assignments. These are designed for regular sales meetings, to give you the information you need in a timely manner. Contact me directly to set a session up at your brokerage.
 
Please contact me directly at mark@realestatelawyers.ca or 1.888.876.5529 to set up a session at your brokerage.
Publications
 
Real Estate Salespeople, Beware
 

 

It has never been more challenging to be a real estate salesperson. Real estate lawyer, columnist, and lecturer Mark Weisleder shows real estate professionals how to serve their clients in a manner that protects their deals, increases their success, and keeps them out of trouble.


Price: $29.95 + shipping/handling    

Click here to purchase this book at this special offer.
Landlord Guide
 
Mark has developed an easy to follow guide for residential landlords, whether you are renting an apartment, house or condominium unit. The guide explains the basic principles under the Residential Tenancies Act that you need to know when preparing any lease, an up to date standard residential lease agreement. rental application form and questions to ask when interviewing potential tenants.

 

Price: $49.95   
Click here to purchase this guide at this special offer.
Put the Pen Down:  What Homebuyers and Sellers need to know before signing on the dotted line
 
 
Mark Weisleder's book, Put the Pen Down!, is now available for purchase. This book is designed to properly prepare buyers and sellers by giving them the information they need to know before they ever enter into an agreement to buy or sell their home or condominium.
 
For more information or to purchase this book, click here 
 
Real Estate Lawyers.ca LLP
Toll Free Tel:   1-855-466-3801
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