We’re ready to buy our second home. I understand multiple offers are common these days, and that an offer with no conditions has a better chance of success. We’ve been pre-approved by our mortgage specialist but don’t have firm approval from the bank. How can people in our position buy without a financing condition? – FINANCE FEARS
DEAR FINANCE: When a homebuyer receives pre-approval from their mortgage specialist, the bank doesn’t know what the appraised value of the home they eventually purchase will be. Because there is some mystery involved, mortgage financing is not 100 percent certain until an appraisal has been completed and the bank gives their final approval.
In the peak of the 2017 buying frenzy, when over 95 percent of offers were firm, I know for certain that a majority of buyers were taking out mortgages, even when they are purchasing with no financing condition. There are ways for buyers to hedge their bets and give themselves the best shot at receiving full approval once they find a home, even though the bank has the final word. The mortgage specialists I work with include all necessary documentation to verify a clients’ income and job status upfront (in the pre-approval stage), so that as long as nothing changes, a bank appraisal is the only outstanding requirement.
From the bank’s perspective, an appraisal is necessary to ensure you’re not buying a $500,000 home for $600,000. Appraisals may be auto approved, or the bank can send out an appraiser to look at a home, which usually takes a few days. Your Realtor’s experience (and your own involvement looking at houses) comes in handy when predicting what the appraised value of a property will be. If you’re pre-approved and confident you can accurately gauge the value of a home, you may feel comfortable enough to make an offer without a financing clause and fully expect to go from 99 to 100 percent approval with the bank. To improve your chances further, consider adding a little extra to your down payment (if you have it available) and avoid spending to your maximum pre-approved amount.
PRO TIP: Mortgage pre-approval is based in the information you provide to your mortgage specialist, so make sure you know your finances inside and out. If your numbers are fuzzy and the bank appraisal comes up short, you will be expected to produce the extra money.
My wife passed away 20 years ago. My children are building a large new home and I’m excited to be moving in with them. How do I decide what to bring with me? After being on my own for so long, I’m not sure how to start this process. – DISPLACED DAD
DEAR DISPLACED: I think you’re in a very special position. At a time when many people are moving into a retirement residence, you’re able to rejoin the family unit. As I tell all of my mature clientele, take your time while navigating this new direction. Figure out how much space you’ll have in your new place and choose what you’ll need to be comfortable, starting with your favourite things. Moving into a new house, your children may welcome an offer to contribute some of your pieces to the common areas of the home.