Banks will say you 'absolutely must' have a 5-day condition for financing on any purchase, but in the GTA's competitive market, this might make buying a home impossible. Is this really a requirement or is the bank just applying an abundance of caution?

A financing condition places the risk of the buyer's financing in the seller’s hands, making an offer less attractive to a seller. A condition is to confirm that you will find a suitable mortgage by the closing date. Here is the list of questions for you. If you can answer yes to all of them you may want to consider removing a financing condition.

1 - Have you been pre-qualified by a bank or mortgage broker?

This allows you to know what the banks are comfortable lending, and also allows you to confirm that your credit is in good standing. You may discover that you have a lower credit rating. Maybe you were the victim of fraud or didn’t pay a bill for years. You want to discover this now versus when you buy the property!

2 - Are you spending within your budget?

If you have a pre-approval from the bank for $800,000 and you're spending $600,000, then that is something you can sleep on versus spending 850,000!

3 - Do you have good credit and consistent source of income?

Banks need to satisfy themselves that you will be able to pay back the loan. They use your income and your credit score to decide this. Make sure your employment status and income won't change.

4 - Will the home get appraised for the purchase price?

If you are buying something that commonly sells for a consistent value, there is a strong chance that the appraisal value will match your purchase price. If you purchase a home for more than what the banks appraise it for, you will be on the hook for the additional funds required to close.

5 - Do you have a strong down payment?

If you have a strong down payment of more than 30 or 40% of the purchase price, the appraised value becomes less important. If you need a high ratio mortgage, the financing condition is a prudent exercise.

6 - Will removing the condition make your offer better?

If you are not competing with another buyer, or the sellers don’t value or appreciate a firm offer with no conditions, keep the financing condition in the offer. This will allow you to go through the normal procedure of getting a formal mortgage offer from your lender within the conditional period.

Removing a financing condition should only be done after you have confirmed your capacity to have all of the funds available for closing and will save you money, and/or get you the home.

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