Can The Property You Plan to Buy Harm Your Mortgage Approval?
posted in Mortgage News
While seeking pre approval for a mortgage is a wise decision, there are still no hard and fast guarantees that you’ll get the mortgage you want from your chosen lender when the time comes for you to make a purchase. In fact, there are several ways in which the type of property you select, can have an impact on the lender’s final decision:
The value of the property
If more than one buyer is competing to bid for a property, the chances are that you may end up bidding more than the market value to get your hands on the home of your dreams. If this is the case, you may find that the appraisal comes back with a lower value than what you’ve paid. Provided you have access to the additional funds needed to cover the shortfall, this shouldn’t have a negative impact on your mortgage approval, but it’s something to be aware of.
The condition of the property
If you spot a property on the market that you want to bid for, but it’s marked as ‘as-is’ or ‘handyman special’, these can sound alarm bells for lenders, and you may not have a great deal of success as far as a mortgage is concerned. What if the property appraisal highlights poor conditions that may be costly to be fix, such as black mold or in the worst-case scenario, structural issues.
The specifics of the property
Lenders may view any of the following types of homes as problematic:
- Log homes
- Properties on leased land
- A rural property (suggestive of hobby farming)
- Any property that contains asbestos, aluminum wiring or underground oil tanks
- The properties remaining economic life
Where the property is
Lenders can be fickle; if they feel that your chosen property is a long distance from your workplace, they may assume that you’ll need to acquire a second home to reduce your commute time, they may impute a ‘shelter cost’ which could hinder your approval.
Condos
Some condominiums may have high maintenance fees or its status certificate reveals significant assessments, and mortgage insurers may be less inclined to approve your loan against these types of condos.
Also, many lenders don’t like to lend against micro-condos, meaning that if the condo you’re interested in is smaller than 500 square feet, you may struggle to gain mortgage approval.
The best thing you can do to increase your chances of mortgage approval, is to work with a local and experienced mortgage broker right from the outset. With their guidance and expert advice on properties in your locality and the current real estate climate, you can give yourself the best chance of buying the property you want, with the lender of your choice.