For many home buyers, the first step of the process is to get pre-qualified for mortgage financing. With pre-approval from a lender, buyers can begin the search for their dream home while keeping within their expected budget.
But there’s more to it than simply ensuring you’ve been pre-approved. The Toronto Star recently published an article on the problems that can arise for buyers who do assume that pre-approval means a guaranteed loan.
Buyers should be prepared for the possibility that, come closing, the lender can refuse financing if they believe the home is not worth the money. A simple appraisal will inform the lender of the home’s value, and they will then move forward with providing financing based on that amount. However, if the appraisal is not done early on, some buyers can run into trouble as their closing date approaches.
A lender will cancel a loan if the appraisal finds that the home isn’t worth what you’ve agreed to pay for it. In these cases, the buyers may lose their pre-paid deposits or face the possibility of being sued. There are a few steps a buyer can take to avoid the risk:
1. Include a financing condition when you purchase your home, meaning you are not obligated to purchase if you find out you cannot receive your expected financing.
2. Contact your lender to find out when they will be doing the appraisal, and how long it will take. If you know in advance the date of the appraisal, you will know not to waive your financing condition before you are guaranteed to receive the loan.
3. Maintain an open line of communication with your sales representative. Let them know the status of your financing approval, and keep them updated with information about the appraisal. Your sales representative is a great link to the seller, and can help keep the purchase process running smoothly even if you run into a few slight problems along the way.
To read the full article, visit the Toronto Star’s website.