Tuesday, April 22, 2014

Writing an offer without a financing condition is playing Russian roulette; here`s why



In this crazy spring market I have started to hear rumblings of home buyers writing offers on homes without a financing condition because they have been `pre-approved`. I would NEVER recommend writing an offer on a home assuming the financing will be fine. This article does a great job of explaining why. 

Pre-approvals have limitations. As a mortgage broker I do my very best to give my opinion on whether or not I believe your file will be ultimately approved once you`ve written an offer on a home but it is sometimes difficult to predict the outcome. I also ask for documentation at the time of your pre-approval to try to mitigate any issues ahead of time. All that being said, if you are putting less than 20% down on a home, the final decision is always up to the insurance company (CMHC, Genworth or Canada Guaranty) and they don`t review your file until there is an offer on the table. It is definitely an imperfect system but I believe that if you are working with an honest mortgage broker they will explain to you the pros and cons of your file and the varied possible outcomes before you go shopping for a home. 

I would never recommend shopping for a home until you have spoken with a reputable mortgage broker and completed a pre-approval and, again, unless you have the money to buy the home, in full, with cash, you NEED a financing condition on your offer to purchase.

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