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Oakville & Mississauga Real Estate Info – Understanding The Financing Clause When Buying A Home

February 27, 2009

If you have been through the process of purchasing a home, you may have remembered a clause, at the prhouseback of your purchase agreement, that states something like this:

“ This offer is conditional upon the Buyer arranging financing within FIVE (5) banking days from acceptance of this Offer.”

Sometimes the financing timeframe is extended beyond five banking days, but more often, I typically see a 5-day window assigned.

The requirement to get your mortgage financing sorted out, within a set number of business days, is a very important time for the purchasing clients and for the real estate agents who represent both sides of the transaction, the buyer of the home and the seller of the home.  Without financing, the purchase offer would be become null and void and the buyer’s deposit money is returned to the buyer.

As I have carefully navigated through several purchase deals and have organized financing for several clients, let me assure you that the time assigned to obtain the financing is often fully utilized and can even be a tight timeline to fulfill depending on factors which are often out of my own control.  Let me take you through an outline of exactly what transpires during this very important timeframe so that you can clearly understand why the process can take this much time.  I have allocated the financing process into a 10-step process.  Below is a table and a detailed description follows for each step.

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1.  If the buyers have not yet started a mortgage financing application, they will need to make arrangements to provide full disclosure on a formal mortgage application.  This would include their residential status, marital status, employment status, income, disclosure of current debts, and all other financial obligations, that the buyers may already have.  The application is created and a credit report is retrieved.

2.  Once the application is complete, it is then forwarded electronically, along with the attached credit report, directly to the chosen bank/lender.

3.  The application is received by the lender and will be assigned to the lender’s underwriter.  It is important to mention that underwriters receive many applications and so therefore the timeframe to receive attention on a submitted deal can be a day or two.
Once the underwriter has accessed the application, it is here that the application is carefully reviewed and considered.  If the application has been carefully prepared, and there is no missing information, and details regarding the applicants have been carefully and properly documented, and a proper determination was made on the applicant’s ability to receive financing, the application would then receive approval by the underwriter.

4.  The underwriter will prepare a mortgage commitment for the applicant(s).

5.  Within the mortgage commitment, the underwriter will assign a list of conditions.  These conditions will be outlined, within the mortgage commitment.  A sample of these conditions might be:
a) applicants to provide proof of income;
b) applicants to provide recent pay stubs;
c) request for a full appraisal on the property;
d) confirmation of proof of downpayment…..etc.

6.  Once the mortgage commitment is forwarded back to me, it is at this point that the clients are informed of the list of criteria that the lender has provided.  The list of conditions would have to be carefully reviewed and as long as each item can be fulfilled, the possibility of the full approval is almost near.   While it is preferable to gather documents before buyers enter into a purchase position, it is not always something the buyers fulfill up-front.

7.  All documents required by the lender, per the mortgage commitment, are then forwarded to the lender for review.

8.  The lender’s fulfillment administrator, will then carefully review all submitted documents.

9.  If the lender’s fulfillment administrator has approved each document, then an approval on the documents would be provided.

10.  It is only when the above items have been fulfilled that a decision is made to waive the financing condition, in the purchase document.


This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785
by email at eblair@mortgageedge.ca or you visit her website at: www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

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