Why the Property Matters in Mortgage Financing

Announcer:

Welcome to the I Love Winnipeg Real Estate Podcast, your premier resource for buying, owning, and investing in Winnipeg's real estate market. And now here's your host, Adrian Schulz, who loves all things real estate, property management and mortgage financing.

Adrian Schulz:

In today's episode of the I Love Winnipeg Real Estate Podcast, I want to speak with you about why the property matters in mortgage financing. Now, when you're looking to qualify for a mortgage, typically a lender will want to review four areas of your application. Your income, credit, the down payment or equity, and the property itself. Now, assuming you have a great job, excellent credit and sufficient money in the bank to qualify for a mortgage, if the property you're looking to purchase isn't in good condition, if you don't have a plan, you might get some pushback from the lender. The property matters to the lender because they hold it as collateral if you default on your mortgage. As such, you can expect that a lender will make every effort to ensure that any property they finance is in good repair because in the rare case that you happen to default on your mortgage, they want to know that if they have to reposess, they can sell the property quickly and recoup their money.

Adrian Schulz:

So when assessing the property as part of any mortgage transaction, an appraisal is always required to establish the value. If your mortgage requires default mortgage insurance through CMHC, Sagen, which was formally known as Genworth, or Canada Guarantee, they'll likely use an automated system to appraise the property where the assessment happens online. A physical appraisal is required for conventional mortgage applications, which means an appraiser will assess the property on site. So why is this important to know? Well, because even if you have a great job, excellent credit and money in the bank, you shouldn't assume that you'll be guaranteed mortgage financing. A preapproval can only take you so far. Once the mortgage process has started, the lender will always assess the property that you're looking to purchase. Understanding this ahead of time, prevents misunderstandings that will bring clarity to the mortgage process.

Adrian Schulz:

Now practically applied, if you're attempting to buy a property in a hot housing market, and you go in with an offer without a condition of financing, once the appraisal is complete, if the lender isn't satisfied with the state or the value of the property, you could lose your deposit.

Adrian Schulz:

Now, what happens if you'd like to purchase a property that isn't in the best condition? Being proactive includes knowing that there is a purchase plus improvements program that can allow you to buy a property that includes some of the cost of renovations in the mortgage. It's not as simple as just increasing the mortgage amount and then getting the work done. There is a process to follow, but it's very doable. So if you have any questions about financing your next property, or potentially using a purchase plus improvements to buy a property that needs a little work, please connect with me anytime. It would be a pleasure to walk you through the process and to work with you. Thank you.

Announcer:

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