You’ve found the home of your dreams and put in an offer. On the advice of your professional team, your real estate agent and mortgage broker, you have made the offer conditional. SMART!! Conditions on your offer to purchase are designed to protect your interests.

These conditions may include a home inspection, receipt and satisfactory review of condo documents, and a financing condition.

What is a financing condition?

The financing condition is designed to give you time to confirm you have an approval from your lender. It essentially tells the Seller that your offer to buy their property is conditional on you obtaining financing. The financing must be satisfactory to you – rate, term, etc. – and not just what you were able to obtain.

Why is the condition of financing so important?

During the preliminary discussions with your mortgage broker we review your personal situation. Even if we obtain a pre-approval, you’re not fully approved for a mortgage until a lender has assessed your file and the property and issues a mortgage commitment.

A financing condition allows time to submit your up-to-date information to the chosen lender. If your file meets the lender’s guidelines, you will receive a conditional approval – conditions are documents, such as employment letter, pay stub, source of down payment, an appraisal, if required etc.

What happens if you do not have a financing condition or you waiver your condition too early and you’re unable to secure financing? You could lose the deposit made to the Seller when the offer was accepted.

The seller may also sue for damages and breach of contract because an offer that falls through hurts the future marketability of their property. This can raise a red flag to the next prospective buyer.

What is the ideal timeline for a financing condition?

Ideally, you should allow seven to ten business days to satisfy your financing condition. This will allow you time to choose the lender that’s right for you and it allows time for your lender to review all your documents, complete the appraisal, if required, and have all lender conditions satisfied before you waive your financing condition.

It’s important to remember that a financing condition is standard for any Real Estate purchase. It can be a stressful time! It’ll be a lot smoother if you’re educated and know what to expect.

Co-written with the team from Your Mortgage Advantage – Martin Breeze, Brooke Juba, Garett Courtier and Jeff McGinn