Writing a Subject Free Offer – Mortgage Tips
Subject free offers seem to be the new normal in Vancouver’s real-estate market. In regards to financing, here are some tips for purchasers writing a subject free offer:
- Prior to writing the subject-free offer obtain the Property Disclosure Statement, MLS Listing, Strata Form B (if available) & Depreciation Report (if available) so your mortgage broker can confirm with the lenders they will finance the property.
- Purchasers should have a down-payment of at least 20%, and preferably 25% of the purchase price. This amount of capital will provide access to the greatest number of lenders.
- Purchasers wanting to use a down-payment which less than 20% of the purchase price are at the mercy of 3 mortgage insurance companies. If these 3 insurance companies decline the mortgage request, the banks will not approve the loan and the borrower is forced to find a private lender at EXTEMELY high interest rates (14%-20%), or risk losing their deposit, or legal action. When writing a subject-free offer on a property I always ask these clients,
“if you have to, can you come up with a 20% down-payment for this property? If you cannot come up with a 20% down-payment, making a subject-free offer is extremely risky”
- Prior to viewing properties (or writing a subject free offer), purchasers should receive a complete mortgage analysis from their mortgage broker to discover their lending limits. Many banks will issue pre-approvals (which is essentialy an interest rate hold) based on a borrower’s self-directed application without verifying the necessary documents. A competent mortgage broker will request the required documents upfront to ensure all information is verified and the process moves smoothly.
- If the property is priced at the purchaser’s upper lending limits, ensure the mortgage broker has received the MLS listing well in advance so they can add the necessary amounts to the application. The property’s MLS listing discloses condo fees, property taxes and sq/ft amounts which may help or hinder the mortgage request.
To learn more about how to write the most competitive offer, please contact me at 778-215-4121.