When is my mortgage a sure thing?

The short answer to this question is: when your lawyer receives the funds from the bank.

Preapproval

When you are preapproved for a mortgage, the mortgage broker, lender, and underwriter are making some assumptions to some extent. These assumptions can include your income, debts, credit, savings and details about the home you will purchase such as the property taxes, size, etc. This is why we always preach that any offer that you make to purchase a home should be conditional on financing. A pre-approval is a piece of paper (or an informal email) that says “you will probably be approved for this amount if everything checks out and we like the property”.

Approval

So you have placed a conditional offer to purchase a home and it has been accepted. Now you have 5 business days to arrange financing. Great – you have done everything right so far. So your mortgage broker gets a commitment from the lender, you review it, and you waive your condition of financing. Now the purchase offer is FIRM (meaning you can’t back out without consequences like losing your deposit and possibly being sued). You may have even provided all the documentation up front to the lender so that your file is complete prior to waiving your condition of financing. Are you 100% safe? Not exactly.

Conditional Approval

You may ask your broker or your lender if you are approved and they say yes and you breathe a sigh of relief. You should breathe, especially if you have a good broker who did due diligence on your file. However, what a lot of people don’t realize is that EVERY approval is a conditional approval. That means the lender requires documentation and other types of verification before they will advance the funds. For example, they may say you are approved, conditional on a appraisal that shows the value of the home is X dollars. Or conditional on your lawyer checking the title of the property.

Getting a mortgage is a process

So when you purchase a home, please be prepared for a PROCESS that takes a little time. The underwriter, lender, broker, lawyer all have requirements that they need to satisfy before the day of closing when the money is transferred to the lawyer and then the seller. There is NEVER any guarantee until that time, so it is up to your broker to try to make sure there will be no surprises and that the purchase will close smoothly!