If you have
been through the process of purchasing a home, you may have remembered a clause,
at the back of your purchase agreement, that states something like this:
“ This
offer is conditional upon the Buyer arranging financing within FIVE (5) banking days from acceptance of
this Offer.”
Sometimes
the financing timeframe is extended beyond five banking days, but more often, I
typically see a 5-day window assigned. The
requirement to get your mortgage financing sorted out, within a set number of
business days, is a very important time for the purchasing clients and for the
real estate agents who represent both sides of the transaction, the buyer of
the home and the seller of the home.
Without financing, the purchase offer would be become null and void and
the buyer’s deposit money is returned to the buyer.
As I have
carefully navigated through several purchase deals and have organized financing
for several clients, let me assure you that the time assigned to obtain the
financing is often fully utilized and can even be a tight timeline to fulfill
depending on factors which are often out of my own control. Let me take you through an outline of exactly
what transpires during this very important timeframe so that you can clearly
understand why the process can take this much time.
To see the 10-step process diagram, please click here
1. If the buyers have not yet started a mortgage
financing application, they will need to make arrangements to provide full
disclosure on a formal mortgage application.
This would include their residential status, marital status, employment
status, income, disclosure of current debts, and all other financial obligations,
that the buyers may already have. The
application is created and a credit report is retrieved.
2. Once the application is complete, it is then
forwarded electronically, along with the attached credit report, directly to
the chosen bank/lender.
3. The application is received by the lender and
will be assigned to the lender’s underwriter.
It is important to mention that underwriters receive many applications
and so therefore the timeframe to receive attention on a submitted deal can be
a day or two. Once the
underwriter has accessed the application, it is here that the application is
carefully reviewed and considered. If
the application has been carefully prepared, and there is no missing
information, and details regarding the applicants have been carefully and
properly documented, and a proper determination was made on the applicant’s
ability to receive financing, the application would then receive approval by
the underwriter.
4. The underwriter will prepare a mortgage
commitment for the applicant(s).
5. Within the mortgage commitment, the
underwriter will assign a list of conditions.
These conditions will be outlined, within the mortgage commitment. A sample of these conditions might be:
a)
applicants to provide proof of income;
b)
applicants to provide recent pay stubs;
c) request
for a full appraisal on the property;
d)
confirmation of proof of downpayment…..etc.
6. Once the mortgage commitment is forwarded
back to me, it is at this point that the clients are informed of the list of
criteria that the lender has provided.
The list of conditions would have to be carefully reviewed and as long
as each item can be fulfilled, the possibility of the full approval is almost
near. While it is preferable to gather
documents before buyers enter into a purchase position, it is not always
something the buyers fulfill up-front.
7. All documents required by the lender, per the
mortgage commitment, are then forwarded to the lender for review.
8. The lender’s fulfillment administrator, will
then carefully review all submitted documents.
9. If the lender’s fulfillment administrator has
approved each document, then an approval on the documents would be provided.
10. It is only when the above items have been
fulfilled that a decision is made to waive the financing condition, in the
purchase document. I would contact the realtor representing the buyers to advise that their financing was completely approved, via the above process, and that financing conditions have been met.
This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage
Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto
area.
You can
contact Elizabeth directly by phone at (905) 510-5785 by email at
eblair@mortgageedge.ca
or you
visit her website at:
www.missmortgage.ca
Elizabeth is licensed with the Financial
Services Commission of Ontario and is also a Member of IMBA (the Independent
Mortgage Brokers Association of Ontario) www.imba.ca
Lic #
M08005880
Brokerage
Lic # 10680
Head office
is located at:
15 Wertheim Court, Suite 210
Comments