X2 Buyer
Active Member
yeah we are essentially talking about the same thing. You only can get the pre-approval through bank (branches) for 90 up to 120 days -unless you go with the one partnered with your builder's project.
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How soon should i start looking for mortgage
- Thread starter Seesus
- Start date
yeah we are essentially talking about the same thing. You only can get the pre-approval through bank (branches) for 90 up to 120 days -unless you go with the one partnered with your builder's project.
help
New Member
I purchased a condo unit with a tentative closing date on Nov. 2012. The builder requests now every unit has to provide a mortgage commitment letter instead of a pre-approval letter; otherwise the deal would be terminated. I don’t understand why a pre-approval letter is not enough. Is it common/reasonable from your experience?
Thank you in advance!
Thank you in advance!
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RedSkyAtNight
New Member
My developer only asked for the pre-approval letter, but I understand that credit is more difficult for developers to secure now. Probably this is a request from whoever is providing the construction financing to the developer.
I'm not familiar with a "mortgage commitment letter" ... maybe it is no big deal for the bank that pre-approved you to provide this. Not sure if this commitment letter binds you to take a mortgage with that bank (probably not the best thing for you), or just commits the bank to providing you the mortgage.
You might ask your lawyer that reviewed your purchase agreement if not providing this is grounds for the developer to terminate the deal.
Personally, I find it hard to believe that a developer would walk away from a deal, even if his bank is asking for this assurance. You can always just give the developer the pre-approval letter and see what happens. Remember, you are doing him the favour of buying his condo unit -- he's not doing you any favours. You might remind him that there are a few other condos out there....
Good luck.
I'm not familiar with a "mortgage commitment letter" ... maybe it is no big deal for the bank that pre-approved you to provide this. Not sure if this commitment letter binds you to take a mortgage with that bank (probably not the best thing for you), or just commits the bank to providing you the mortgage.
You might ask your lawyer that reviewed your purchase agreement if not providing this is grounds for the developer to terminate the deal.
Personally, I find it hard to believe that a developer would walk away from a deal, even if his bank is asking for this assurance. You can always just give the developer the pre-approval letter and see what happens. Remember, you are doing him the favour of buying his condo unit -- he's not doing you any favours. You might remind him that there are a few other condos out there....
Good luck.
UrbanVigor
Active Member
Mortgage Commitment = Pre Approval
I received a pre approval and it said mortgage commitment at the top of the letter. They are one in the same.
I received a pre approval and it said mortgage commitment at the top of the letter. They are one in the same.
K
kcc0
Guest
I have followed this very interesting discussion since the start. Most of what has been said is true, however, I would point out that a "Mortgage Broker" is an independent, self employed individual who is compensated solely by the lender. Hence there is no fee to you as a buyer from the General Public. A reputable "Broker" is in this business for the long term and has the clients best interests at heart.
I acknowledge the difficulty experienced by a "self-employed" individual but working with a reputable Mortgage Broker should make the process easier.
Pre-approvals are rate holds only, as your individual credit rating, net worth, income levels and property are all taken into consideration when either a Bank or a Mortgage Broker makes their final mortgage decision.
You should always check with your Bank first and then approach a Broker. Interview several Brokers if you wish, but working with one, is the best in the end result, as they want future Business from you, your friends and family. They will need to "earn" your respect and trust" in order to stay in Business.
Hope this helps!!!!
I acknowledge the difficulty experienced by a "self-employed" individual but working with a reputable Mortgage Broker should make the process easier.
Pre-approvals are rate holds only, as your individual credit rating, net worth, income levels and property are all taken into consideration when either a Bank or a Mortgage Broker makes their final mortgage decision.
You should always check with your Bank first and then approach a Broker. Interview several Brokers if you wish, but working with one, is the best in the end result, as they want future Business from you, your friends and family. They will need to "earn" your respect and trust" in order to stay in Business.
Hope this helps!!!!
simuls
Senior Member
Mortgage Commitment = Pre Approval
I received a pre approval and it said mortgage commitment at the top of the letter. They are one in the same.
A mortgage commitment and a pre-approval are definitely NOT one and the same.
A pre-approval simply means that they anticipate that they will be able to give you a mortgage based on the information you provided them today. In 3 years, when you're ready to get it, they can renege for almost any reason.
A commitment letter is a contract that they enter into with you guaranteeing you your mortgage if all the terms are met. I just got one with no terms, so regardless of my financial situation in a couple years, they have to give me the mortgage.
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UrbanVigor
Active Member
OK, I see the slight difference and certainly if there are no terms then they'll have to give someone the mortgage even if their financial situation changes and they shouldn't... in which case, the borrower probably shouldn't take out that mortgage.
I'd still be surprised if a "pre-approval" wasn't accepted since the difference is hardly of any substance.
I'd still be surprised if a "pre-approval" wasn't accepted since the difference is hardly of any substance.
X2 Buyer
Active Member
Mine states final approval on the top - but for the sub-listed items a lot referred to "see mortgage commitment". It sounds to me like the bank has the "mortgage commitment" already on their end for my case (the approval). I will go check it out with my bank.
RedSkyAtNight
New Member
A mortgage commitment and a pre-approval are definitely NOT one and the same.
A pre-approval simply means that they anticipate that they will be able to give you a mortgage based on the information you provided them today. In 3 years, when you're ready to get it, they can renege for almost any reason.
A commitment letter is a contract that they enter into with you guaranteeing you your mortgage if all the terms are met. I just got one with no terms, so regardless of my financial situation in a couple years, they have to give me the mortgage.
Let's ask Google - it knows everything!
from: http://www.mortgagesourcecanada.com/allaboutmortgages.htm
Q What is a Mortgage Pre Approval?
A A mortgage pre approval ( Pre - Qualification) is based on the initial information provided by you about your credit history, employment length and annual income. Your mortgage agent will use this information to tell if you approx. the amount, rate etc. you would most likely qualify for.
You will be asked to provide as much information as possible so your mortgage agent can give you a good idea of what you can expect and qualify for.
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Q What is a Mortgage Application?
A A full application will be submitted to a lender that is most likely to approve you for financing. If you are approved, an underwriter will prepare a mortgage approval and mortgage commitment (see mortgage commitment) stating the amount, rate and term of financing you have been approved for.
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Q What is a Mortgage Commitment?
A A mortgage commitment is a formal indication by the lender that it will grant a mortgage and advance funds, based on certain conditions. It includes details of the property, mortgage type, amount and terms. This will include lender fees, brokerage fees and insurance premiums. The commitment is essentially a conditional lender approval, as the noted conditions are to be fulfilled by the borrower.
I'm looking at the document that RBC provided me when I bought my unit from the developer. It is a letter and it actually doesn't call itself either a "commitment" or a "pre-approval".
It's a letter that was issued approximately 2 years before my condo was to be finished. It says "I'm very pleased to confirm our approval of mortgage financing in the amount of $xxxxxx..." and its sets out the term, interest rate, payments, amortization period, etc.
Its not exactly binding on RBC though, as it is careful to advise that "Prior to our advancing funds for your mortgage the following conditions must be satisfied..." (verification of employment and income, verification of downpayment, property appraisal, etc.) So its not exactly totally binding on the bank.
Based on this, I'd say that this was a "mortgage commitment" (according to the above definitions). It was pretty easy to get from the bank, so you should be able to get one as well without too much trouble.
Simulus, I would be surprised if any bank would commit with "no terms, so regardless of my financial situation in a couple years, they have to give me the mortgage" as you write. That would not be very bank-like.
X2 Buyer
Active Member
I'm looking at the document that RBC provided me when I bought my unit from the developer. It is a letter and it actually doesn't call itself either a "commitment" or a "pre-approval".
It's a letter that was issued approximately 2 years before my condo was to be finished. It says "I'm very pleased to confirm our approval of mortgage financing in the amount of $xxxxxx..." and its sets out the term, interest rate, payments, amortization period, etc.
Its not exactly binding on RBC though, as it is careful to advise that "Prior to our advancing funds for your mortgage the following conditions must be satisfied..." (verification of employment and income, verification of downpayment, property appraisal, etc.) So its not exactly totally binding on the bank.
Based on this, I'd say that this was a "mortgage commitment" (according to the above definitions). It was pretty easy to get from the bank, so you should be able to get one as well without too much trouble.
Right mine (from TD btw) states like yours the details of the mortgage and conditions etc, but if this is the mortgage commitment why there are items referred to "see mortgage commitment"? I am still puzzled.
simuls
Senior Member
Simuls, I would be surprised if any bank would commit with "no terms, so regardless of my financial situation in a couple years, they have to give me the mortgage" as you write. That would not be very bank-like.
I agree with your logic and understand that it's a unique situation (my specialty!), but I'm putting 40% (of the purchase price) down on a property and because of appreciation, the actual mortgage will amount to less than 40% of its current value. It's a no risk situation for the bank. I either pay the payments (they make money), default (they possess/sell and make a LOT of money), or sell myself (pay off the mortgage and make money) - that's why they agreed to it.
Also, according to my banker, at RBC if you put more than 35% down, the only info they normally need to give a mortgage is "stated income" - no tax assessments or anything. It's actually quite a normal procedure, not for me, but for wealthy immigrants who have no employment history here, but move with some money.