Most real estate offers include a financing condition, which allows time for the buyer to obtain the necessary financing to complete the purchase. Financing conditions dates typically allow five business days for the buyer to secure the necessary financing and get a fully approved mortgage. We’d like to suggest a longer financing condition date (10 days), here’s why.
Lenders are requiring more supporting paperwork than ever before.
To provide a time line perspective; once an application is submitted and reviewed, the lender will return a conditional approval, usually within one to two days. Once the conditional approval is received, the supporting documents for property (purchase agreement, MLS), for income (job letters, pay stubs, NOA’s, etc), for down payment (bank statements, etc) can be sent in. Lenders will again require another two to three days to review.
In this instance five days can be enough if we have already met with the borrower, to get our necessary RECA documents completed, and they have provided all the supporting documents up front, and there are no surprises from the lender. If not, five days can be a challenge for even the simplest of mortgages. Note, during busy periods lenders can take longer to review documents. There were several lenders over the summer that required four days and some wouldn’t review documents until everything was submitted. So sometimes, a five day financing conditions date can limit lender choices.
If an appraisal is required (required on all transactions up to 80% LTV), it generally cannot be ordered until the conditional approval is provided. The appraiser may take a day or two to view the property and will require a day or day or two to complete the appraisal report, and once submitted to the lender, they have two to three days to review it. So, if an appraisal is required five days can be a challenge and lead to paying ‘rush’ fees to the appraiser.
If a condo is involved, more lenders are requiring copies of the condo docs, specifically the current budget and the last two years financials. Sometimes they take longer to get from the seller or they are given to a condo doc review specialist and have to be tracked down thru them.
While most financing conditions dates are met, a five day condition date can limit lender choice, result in extra ‘rush’ fees, and creates undo stress. It makes more sense to ask for a longer time period and ‘waive’ early, than asking for an extension.
Remember too that most lenders want to have 10 business days from unconditional approval (ie. all that is left are solicitor conditions like ID verification etc.) to funding. If you have a rush deal, again, this can cause undo stress for the buyer.
