So you've found the home you want to buy and have decided to take on the financial responsibility of a mortgage. Perhaps one of the major reasons why the purchase of a home can fail at what is essentially the last moment is due to problems with financing. So what are some of the common financial hurdles that need to be overcome when you're finalising the purchase of a new home?
Once you have agreed to purchase the property, you will generally be required to sign a contract of sale. This starts the clock. If you are not able to obtain finance by the settlement date, then you might lose the property. If the settlement date is fast approaching and finance has not been finalised, then have a word with the company that is handling the conveyancing on your behalf. They can negotiate an amended settlement date. This should only happen if you are certain that financing is forthcoming and are able to give a new date that has been agreed upon by your bank or financial institution.
If you find yourself in a position where you're still seeking financing after the contract of sale has been signed, be wary of shopping around for credit. By all means you should make enquiries with a number of banks and financial institutions, but do not make multiple applications for credit. These multiple applications for credit can lower your credit rating. Whether applying for credit cards or for a more significant amount of credit, these multiple applications are never wise. Many aspects of a credit application are automated, and if it seems that you have obtained multiple lines of credit, then it can also seem like you're financially overburdened (thus increasing your chance for a credit default in the near future). Your credit report only indicates applications for credit, not whether the application was successful. Of course, if your application for financing is declined, you can certainly appeal this. You might simply wish to apply for financing through your existing bank or financial institution, particularly if they offer flexibility.
Obtaining a Loan in Principle
So what is this flexibility when it comes to obtaining financing? Enquire with your bank or financial institution and find out if they offer a loan in principle. This first involves a historical examination of your finances (which is why it's easier to obtain this from your own bank), and then a loan offer. The loan is for a set amount and is made available for a predetermined period of time (generally a number of months, but this varies and is often negotiable). This means that once you find the home you want to buy, the loan is then finalised and the funds are made available. It's essentially a preapproval for your mortgage, and it means that the financing is immediately available once you've found the home you want to buy.
Don't be tripped up by financing issues when you purchase a home. By shopping around and possibly obtaining a loan in principle, you can ensure that the purchase of the home can be completed quickly and without complications.Share