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 get a fully approved for a 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 timeline perspective, once an application is submitted and reviewed, the lender will return a conditional approval, usually within 24-48 hours. 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) are submitted.
Lenders require an additional 48-72 hours to review the documents. In this instance five days can be enough if we have already met with the borrower. If not, we need to obtain the necessary RECA documents, along with the income, down payment and other supporting documents. If there are surprises, five days can be a challenge for even the simplest of mortgages.
During busy periods lenders can take longer to review documents. Remember, busy is not relative to the market in Alberta. Most of the lenders are national and their underwriters work on files from one side of the country to the other. So, while Alberta might not be busy, but other parts of the country may be.
Yes, there are always lenders that are faster than others, but are they offering competitive rates? Do they offer the product that these borrowers need? Sometimes, a five-day financing condition can limit lender choices.
If an appraisal is required, we won’t know for sure until we have that conditional approval. The appraiser may take a day or two to view the property. They then require at least a day to complete the appraisal report. Once submitted to the lender, they have 48-72 hours to review it.
While most times, it progresses faster, if an appraisal is required, five days can be a challenge. It may lead to borrower paying ‘rush’ fees to the appraiser.
If a condo is involved, more lenders are requiring copies of the condo docs. They want to see the current budget and the last two-years financials. Sometimes these 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 condition dates are met, a five day condition date can limit lender choice. It can also result in extra ‘rush’ fees and create undo stress. Unless there is a competing offer situation, it makes more sense to ask for a longer time period and ‘waive’ early, than asking for an extension.