The vast majority of people buying a home in Lethbridge—and anywhere in Canada—will finance their real estate purchase with a mortgage. At one time, it was relatively easy to get one. Just submit a few documents to a mortgage professional, and almost like magic you were “pre-qualified” to buy a home. The rest was fun and games … right?
Things are shaping up a little differently in 2013. The whys and what-fors of this are another discussion entirely, but it’s no secret that the Canadian government has undergone a kind of fiscal awakening on Canadian real estate. In turn, the Canada Mortgage and Housing Corporation (CMHC) has had to tilt the lens on mortgages as well. I’ll leave it at that.
The important thing to know is that what you think you can buy and what you can buy are not always the same thing. What one lender says “yes” to, another lender may not even look at. Moreover, the lenders have begun scrutinizing supporting documents with a microscope. From employment letters to bank statements to real property reports and individual features of the home, each lender has a unique set of criteria by which to evaluate both you and the property you wish to buy.
Pre-approvals aren’t a guarantee of anything either. That’s because they’re based on variables the bank won’t rely on until you actually write on a property. A good mortgage broker will go further than a pre-app and help you fully understand your home ownership options going forward. Just make sure you actually sit down and talk with such a person BEFORE you go house shopping, and especially before you make an offer on a home.
Buying a home takes time and effort. How committed are you to the process?
It can take weeks to find the right property. It can take days more to negotiate with the seller and arrive at a legally binding purchase contract. It can then take WEEKS MORE to secure financing on the home. Yes, you read that right: WEEKS. It can take 10 business days or more, and that’s WITH a pre-approval in place.
Securing the money to buy the home doesn’t mean you get to move in. Once final conditions are removed (e.g. financing, home inspection, etc.), your lawyer will need at least more 10 business days to get everything ready for the transfer of ownership on possession day.
But back to our ‘Talk is Cheap’ talk: if you don’t start the lending conversation with your mortgage professional well in advance of making an offer to purchase, you put yourself in a very delicate position as a buyer. The reason for this is twofold:
- You and your real estate agent cannot negotiate with confidence because you don’t fully understand your financial position going in, let alone what supporting documentation the lender is going to require and how long that will take to process.
- If you can’t get financing approved before the agreed-upon condition date per the contract, you will be faced with two choices: ask the seller for an extension or collapse the deal. The Seller may say “No” to your extension request because s/he wishes to re-market the property to other buyers.
None of this is to mention how you will feel after you and possibly your family have invested weeks or months of time, energy and expense locating, negotiating and contracting to buy the perfect property, only to discover you can’t get financing.
Buying a home is a very big deal. Treat it that way. Do the financial legwork in advance. Talk to a mortgage professional. If you don’t know a good one, ask your real estate agent to provide you with names of those who come highly recommended. (Lethbridge has some very talented mortgage brokers!)
THEN go house shopping. I promise, you will avoid so much heartache. You’ll also have a lot more fun along the way. Who can argue with that?