Personal Finance

What do you need to make an offer on a house?

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  • Feb 9th, 2006 8:53 am
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Deal Addict
Jan 21, 2003
1141 posts
11 upvotes

What do you need to make an offer on a house?

We've been to the bank and are pre-approved for a certain mortgage amount, based on us putting 5% down. When we make an offer on a house, conditional upon financing, when do we have to give to the bank the 5%? When they are approving the financing or when the deal closes?
24 replies
Deal Addict
Oct 2, 2003
1655 posts
230 upvotes
North West Ontario
When the deal closes.
Deal Fanatic
Feb 1, 2006
9645 posts
911 upvotes
Muskoka
Downpayment when deal closes, but deposit must be paid at time of deal acceptance, as a show of good faith. The deposit depends on your local market, but is generally $5k and up around here. Your agent will know the appropriate amount.
Deal Addict
Mar 22, 2005
2008 posts
10 upvotes
When you make an offer, you need to give your realtor a deposit by cheque, usually between $1000 and $5000. Once the transaction closes, the bank takes your downpayment, the mortgage amount and any outstanding fees (property tax, interest, etc.) and transfers it to the seller. You also need a real estate lawyer to do the land title work, which costs around $1000.
Deal Addict
Jan 21, 2003
1141 posts
11 upvotes
You guys are awesome, instant responses.
Deal Addict
Feb 22, 2005
2431 posts
8 upvotes
Make sure you put these two clauses in your offer when the time comes:

1) Independent House Inspection passing grade to your satisfaction

2) Contingent upon Finance approval

If there are counter offers, you may need to eventually remove these to negotiate, however, I would put them in as a "last resort" to get out of the deal if you change your mind which often happens.
Deal Fanatic
Feb 1, 2006
9645 posts
911 upvotes
Muskoka
Also add in a condition on lawyer approval of contract, and I would never waive any of those conditions just to get a house I wanted. If anything is wrong, you will be in breach of contract if you try and renege.

Also, never use your agents home inspector, they are biased in favour of glossing over problems to stay in the agents good books. I got burned on this one once.
Deal Fanatic
User avatar
Nov 13, 2005
5897 posts
301 upvotes
GTA
scottyb wrote:We've been to the bank and are pre-approved for a certain mortgage amount, based on us putting 5% down. When we make an offer on a house, conditional upon financing, when do we have to give to the bank the 5%? When they are approving the financing or when the deal closes?
Make sure that your 5% DP has been in your possession (i.e. bank account) for atleast 90 days prior to closing. I belelive that this is a requirement from CMHC.

sk :)
Deal Fanatic
User avatar
Apr 8, 2001
5275 posts
32 upvotes
..........money sure helped me :razz:
.....and enough not to pay for Bank insurance....
......and enough to have mortgage that was not too heavy...monthly payments.
******************************************
:twisted:
Sr. Member
Jul 8, 2004
627 posts
5 upvotes
GTA
what happens to the deposit if for example the result of the independent house inspection is not to my satisfacation? Do i get it back from the seller?
Deal Addict
Dec 9, 2001
1590 posts
91 upvotes
Maple
atb1o1 wrote:what happens to the deposit if for example the result of the independent house inspection is not to my satisfacation? Do i get it back from the seller?
Yes. Actually it never gets to the seller, the agents hold it "in trust". We had that happen to us.. liked a house, put a deposit down, but the inspection proved that the house just wasn't worth it. It took about 3 weeks, but we finally got the deposit back from the agent.

Like others have said, absolutely have those 3 conditions on the agreement.
(inspection/finance/lawyer)
Deal Addict
Nov 26, 2004
4462 posts
4129 upvotes
And if you know what you want, and are doing most of the searching yourself, and you are not working or have sign anything with an agent, you can contact these guys

http://www.realtysellers.com/programs.asp?id=5

They give you a cash rebate based on the commission that they collect. According to their website, if you buy a place for $300k, they give you back $750 in cash, that is probably enough to pay for the moving cost or $750 extra to spend on stuff that you don't need that you see on RFD. :razz:
Jr. Member
Mar 14, 2004
188 posts
sunnybono wrote:Make sure that your 5% DP has been in your possession (i.e. bank account) for atleast 90 days prior to closing. I belelive that this is a requirement from CMHC.

sk :)
Unless it is a gift from an immediate family member. Then you just need a letter stating that it is a gift.

If your borrowing from your RRSP, the funds have to be in your RRSP account for at least 90 days.
Deal Addict
Jan 21, 2003
1141 posts
11 upvotes
Good info on having the DP in my bank account 90 days prior. I have a LOC that I may use to help me get to a 10% DP, so I'm guessing I will have to transfer the funds to my bank account 90 days ahead of time to do so.

I'm guessing that I don't necessarily have to hold the funds in an account at the institution that the mortgage is coming from, correct? Ex. I can hold the funds @ ING.
Jr. Member
Mar 14, 2004
188 posts
scottyb wrote:Good info on having the DP in my bank account 90 days prior. I have a LOC that I may use to help me get to a 10% DP, so I'm guessing I will have to transfer the funds to my bank account 90 days ahead of time to do so.
Just make sure that your Total Debt Servicing Ration doesn't go over 40% or CMHC or the bank may decide to pull their approvals. CMHC does have a program that allows you to borrow the whole downpayment, but you have to have a Beacon Score over 680 and your Total Debt Servicing still needs to be 40% or lower.
scottyb wrote: I'm guessing that I don't necessarily have to hold the funds in an account at the institution that the mortgage is coming from, correct? Ex. I can hold the funds @ ING.
Yes you can hold it somewhere else. You can even put it into an investment if you want, but you might take a chance of losing some money that way if you are not careful.
Jr. Member
Mar 14, 2004
188 posts
scottyb wrote: I'm guessing that I don't necessarily have to hold the funds in an account at the institution that the mortgage is coming from, correct? Ex. I can hold the funds @ ING.
If your going to borrow the money anyway, and you haven't owned a home in the past 5 years, you might want to take out an RRSP loan at prime and use the refund to pay back the loan faster. You can then borrow from your RRSPs for your downpayment, as long as they have been in for 90 days.
Deal Addict
Jan 21, 2003
1141 posts
11 upvotes
Droog99 wrote:If your going to borrow the money anyway, and you haven't owned a home in the past 5 years, you might want to take out an RRSP loan at prime and use the refund to pay back the loan faster. You can then borrow from your RRSPs for your downpayment, as long as they have been in for 90 days.
Solid idea, but I have maxed out my RRSP's and will be pulling from them for part of my DP.
Deal Addict
Oct 2, 2003
1655 posts
230 upvotes
North West Ontario
You do not need to have the money sitting for 90 days. The bank just wants to know you will have the money. We actually used our line of credit to bump to the 25% Downpayment level. The bank did bridge financing for a few days (using our LOC) and we paid it off once our old house was sold.

We had zero funds until our old house closed, 5 days after our new house closed.


scottyb wrote:Good info on having the DP in my bank account 90 days prior. I have a LOC that I may use to help me get to a 10% DP, so I'm guessing I will have to transfer the funds to my bank account 90 days ahead of time to do so.

I'm guessing that I don't necessarily have to hold the funds in an account at the institution that the mortgage is coming from, correct? Ex. I can hold the funds @ ING.
Jr. Member
Mar 14, 2004
188 posts
tlamm wrote:You do not need to have the money sitting for 90 days. The bank just wants to know you will have the money. We actually used our line of credit to bump to the 25% Downpayment level. The bank did bridge financing for a few days (using our LOC) and we paid it off once our old house was sold.

We had zero funds until our old house closed, 5 days after our new house closed.
The 90 days is a CMHC rule. If you have 25% down, then the bank doesn't need to go through CMHC.

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