The Spring home buying frenzy is well underway. Many listings are starting to get multiple offers on the offer date. The questions we always get from REALTORs and Homebuyers is “How can we write an unconditional offer?”

The simple answer is you really can’t. I know, many REALTORs and many Homebuyers take huge and monumental risks by writing a clean or unconditional offer. A big risk it is too. If for some reason the application is not approved, the homebuyer faces losing their deposit and can also be sued by the vendor.

Before we talk about how to be more competitive and better prepared, I think it important to discuss what a lender and the mortgage insurer is looking for in a mortgage application.

The mortgage application is subject to many factors. The most important is the property itself. The home should be in good to great condition. It is important to review the property disclosure statement if available and to look for any questions where the vendors may have disclosed something detrimental to the application. Some examples of things that can red flag and application are; knob-and-tube wiring, aluminum wiring, foundation cracking, water seepage, wood heating and wood foundations just to name a few.

The next major factor in a mortgage application is the strength of the homebuyers. As mortgage professionals, we must check and analyze your credit, your income, and your down payment. It sounds simple, however, there are many moving parts. Let’s break this down further to give you a better understanding.

Credit: Typically we are looking for a credit score of 620 or higher. While exceptions can be made for lower credit scores, this is generally the lower limit. We are also looking for two active trade-lines. This means a borrower must have two open and active credit facilities such as a credit card, loan or line of credit. If your mortgage professional, bank, or credit union has not checked your credit, then your pre-approval is probably invalid.

Income: A borrower must be a permanent employee and off of probation. You can be Full-Time or Part-time but your hours must be guaranteed by the employer. If a borrower does not have guaranteed hours, then we must use a 2-year average for income at the same job. Lenders will now go the extra step and call your employer to verify your employment and guaranteed hours.

Down Payment: Generally, your down payment needs to be in a Canadian financial institution for 90 days. As mortgage professionals, it is imperative that we can see your banking/financial statements to verify the down payment. We must look for any large deposits in the last 90 days that are unusual. Any large deposits need to be verified. For example, a borrower has sold a car, received a gift, or deposited wedding gift monies. The funds need to be verified or the lender will not be able to fund your mortgage.

Now, how can you be more prepared and competitive in a hot market?

1). When your mortgage professional asks you for a lot of documentation. Provide it as soon as possible. Employment letters, recent pay stubs, 2 years T4s, 90-day confirmation of your down payment, void cheque and ID are standard.

2). Use a professional REALTOR and introduce them to your mortgage professional. I can speak from experience and if the REALTOR and the Mortgage Professional are on the same page, the process goes much faster and smoother for the homebuyer.

3). Found THE house and going to put in an offer? Let your mortgage professional know. Send them the MLS listing and PDS – property disclosure statement (if available) in advance so they can look for potential challenges.

4). Always keep your documentation up to date. Credit bureaus expire after 30 days, Employment letters and paystubs expire after 60 days, and most importantly a borrower must provide up-to-the minute bank and financial statements for down payment.

5). Please ensure that you offer an amount that you are actually qualified for. If you offer more than your pre-approval amount, chances are that you won’t be approved.

6). Have your deposit in your bank account and ready to go. Your REALTOR will want you to have $5,000 – $10,000.

Do not leave anything to chance. Be over-ready and confident in your offer.

I look forward to helping you with all of your home financing needs.

Peter Paley