Monthly Archives: May 2010

What NOT to do AFTER your mortgage has been approved and BEFORE it funds

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Generally speaking real estate buyers will include a condition “subject to financing” when buying a home.  Once the significant lender conditions have been met (such as confirmation of your ongoing employment, income and your down payment) I will provide you with the lenders mortgage commitment and a letter confirmation of the approved mortgage financing.  You can go ahead and remove the subjects on your offer to purchase, if you wish.  Once you do this you are buying that home. Therefore, your financial situation should not change significantly before the completion/closing day when the mortgage funds.  Or the money might not be there!

It is very important to remember that the lender reserves the right to review all applicant’s financial status right before closing on your mortgage.   (They can verify your debt status by pulling a new credit bureau report)   If there is a substantial change in your financial status, the lender could refuse to fund the mortgage. This would normally only happen if you could no longer “qualify” for the mortgage based on the debt servicing ratios they rely on.

I recommend you AVOID the following once you have bought a home and are waiting for the mortgage to fund:

  • Do not quit your current job
  • Do not reduce your income (go from full time to part time, take a lower paying job with the same company)
  • Do not go out and buy all the new furniture and appliances for your new home and put it on a “do not pay for a year account”
  • Do not enter into a new lease for that car you “have to have”
  • Do not rack up credit card debt
  • Do not co-sign a loan or mortgage for anyone else
  • Do not stop paying your current debts or pay late (including the current mortgage on your existing home)
  • Do not spend the money you saved for your down payment and closing costs

I specialize in working with First Time Home Buyers and New to Canada purchasers because I love to educate and support them through the home buying and financing process.  

If you or someone you care about is in the market to buy a home, please contact me @ 604-726-9550.  I will guide you so that you can easily determine which mortgage financing option  will work best for your investment decision.

What happens to my deposit? When do we get the keys?

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Last night I met with a wonderful young couple who are in the process of buying their first home. I am arranging their mortgage financing for them.

The wife is already seeing herself living in their new home, enjoying the convenience of in suite laundry, hardwood floors for her baby to crawl on and additional living space. Her husband is still thinking about the contract details, asking me many great questions about the next steps in the home buying process.

They have an accepted offer and we are going through the process of getting all the documents in order to meet the lenders conditions for financing approval.  They have already prepared the 5% deposit cheque to be given to their Realtor “In Trust” when the subjects are removed.  He wanted to know if he gets that money back? If not where does it go and when do they pay the rest of the down payment? When do they get the keys to their new home?

I explained that once the lender is satisfied  they have the employment income to support the mortgage loan, the proof they have the down payment from their own savings and approval is provided by CMHC for the default loan insurance, I will give them a letter to confirm they can remove the “subjects” for financing. At that point if they are satisfied with the other conditions they identified (home inspection) they will sign a contract addendum to remove the subjects.  Once they remove the subjects they are bound by the contract and they will be buying that home.  They will provide the deposit of 5% of the purchase price, to their Realtor. This will be deducted from the total down payment they agreed to provide. (Purchase price less down payment equals mortgage amount)

Approximately one week before the sale is to complete they will meet with their solicitor.  They will pay the balance of the down payment (subtracting 5% deposit they already paid) and the remaining closing costs, such as property tax adjustment and the legal fees. Once this part of the transaction is completed, the lender (in this case a Credit Union) will forward the money they have borrowed (the mortgage amount) to their solicitor, who will in turn pay for the property they have purchased on the “closing/completion date.”  The following day they will meet with their Realtor to receive the keys to their new home.

My client’s questions last night reminded me to break down the steps.  Now that they have found their home and they are going through this in real time,  it is important to break the steps down for the home buyer so this is  a positive experience, as stress free as possible (considering they are making their biggest financial purchase of their young lives)!

We talked about this process when we first met two months ago.  I left them with a Home Buyers Information Kit and an information sheet on the Costs of a Residential Purchase.   We communicated via email and on the phone several times before they found the home they wanted to buy. 

This was a great reminder for me about knowing my client, understanding their need to know.   

 I am happy to be the one to help you through the home buying and mortgage planning process.  When you or someone you care about, is buying a home, call me 604-726-9550! I want to help and make this a positive experience for all my clients.

Enjoy your spring days and nights.

Karen Boies   Mortgage Planner

Boies.k@mortgagecentre.com