If you’re in the market for a new home, you’re probably wondering how to finance it. For buyers, getting pre-approved for a loan is vital before beginning your search. This will give you an idea of how much you can afford. Sellers will take you more seriously as a potential buyer if they know you’re already approved for a loan. Here are some tips for both buyers and sellers when it comes to mortgage financing.
With prices declining in all markets in Canada, now can be a great time to purchase a home. Although mortgage rates are unusually high at the moment, qualified buyers can benefit from the market downturn. Consider getting a shorter-term mortgage to allow them to see what’s happening with the market in the next couple of years.
Besides the basic requirements for mortgage loan approval, here are a few key considerations that can affect buyers and sellers that nobody talks about until it’s too late.
MLS Listing Information
We frequently see Listing Agents, including comments on the MLS listing like “handy-man special” or “fixer-upper.” This is the kiss of death when a lender considers these comments. The reason is that if infers the home is in an undesirable condition. Something that is not “marketable.” While lenders want to avoid owning your home. Suppose the property goes into Power of Sale. In that case, lenders want to be reasonably assured they will recoup their investment in a reasonable timeframe. Putting their money into a sinking ship puts them off at the get-go.
If you are selling a home that needs repair, do not allow these comments on your MLS. Lenders can view previous versions of MLS listings and see changes to the listing. Most Buyers (with the help of a good buying agent) are aware of current price values, and buyers will know when a property is undervalued. Let the photos etc., speak to the current condition of the home. The lender can also see the current state but does not draw unnecessary attention to the fact that the house needs TLC.
Condition of Financing
When the market was super competitive, many deals were not getting accepted by sellers if there were any conditions. This can be risky, especially if current market conditions have inflated prices and comparable sales are challenging to find.
Regardless of the current market conditions, each buyer must be 100% comfortable with the transaction. Do not be pressured into going in “firm” if it makes you uncomfortable. Make sure to understand your terms for moving forward with a purchase. If this means a condition of financing must be included, stick to your guns. Finding an issue with the deal is not worth going firm, and a lender declines your application. This can lead to unnecessary law suites. One transaction tanking creates a domino effect with all related transactions.
In a changing market, it’s almost guaranteed that the lender or the default insurance provider will require an appraisal. Therefore, understanding the current market value of the property you buy or sell is critical to the transaction. A lot of analysis can be done beforehand to ensure you’re purchasing the home at the value the lender will support. Suppose comparable sales levels are sparse or non-existent. In that case, it’s even more critical to include a condition for financing in your purchase agreement. Unless you have a big bucket of money and can absorb the difference in the agreed purchase price with the appraisal value. Check out our handy home evaluation estimator to start the process.
In conclusion, following these mortgage financing tips will help ensure a smooth and successful transaction for both buyers and sellers. With careful planning and communication, all parties can avoid any stressful surprises. It is essential to be aware of the current climate and trends. With interest rates on the rise, now is an excellent time to lock in a rate. It is essential to be mindful of your budget. Work with a trusted mortgage professional to find the right loan for your needs and avoid any potential pitfalls. Focus on the positives and enjoy your home purchase!