Real Estate

New Build: Builder asking for Mortgage Committment

  • Last Updated:
  • Oct 24th, 2020 10:47 pm
Deal Guru
Feb 29, 2008
12594 posts
7827 upvotes
moonlight20 wrote: I have a similar situation, building asking for mortgage commitment. I am hesitant to go through the full mortgage approval process because I don’t fully understand the penalty or charges for not closing the mortgage at the end. The rate locked by the mortgage specialist with builder is not the best compared to market. I may also sell my assets and borrow money from family to pay in cash. Can you guys help me to understand what the builder actually look for? Do you know any bank contact who can help on it?
You are not tied to that bank. You're free to go to other banks. I have an approval right now and have no plans going with this bank.
Newbie
Jul 21, 2020
13 posts
2 upvotes
Do you need to go to the mortgage agent associated with the builder? I called the bank branch locations. They said it is a preapproval, unlike the mortgage agent associated with the builder who will push it to full mortgage approval.
Newbie
Jul 21, 2020
13 posts
2 upvotes
Can you send me BNS contact who I can ask questions? I have done a Scotia eHome pre-approval online. I wonder if I can use that instead of hitting by another credit check.
Jr. Member
Dec 1, 2013
146 posts
51 upvotes
Ottawa
It may depend on the builder but often the pre approval is enough. They just want to know you can pay. In the agreement they have a provision that says either a firm approval from lender is required within 5 days of signing or alternative means as decided as appropriate by the vendor. My vendor accepted the pre approval.
Deal Fanatic
User avatar
Feb 2, 2014
8329 posts
2334 upvotes
Toronto
moonlight20 wrote: I have a similar situation, building asking for mortgage commitment. I am hesitant to go through the full mortgage approval process because I don’t fully understand the penalty or charges for not closing the mortgage at the end. The rate locked by the mortgage specialist with builder is not the best compared to market. I may also sell my assets and borrow money from family to pay in cash. Can you guys help me to understand what the builder actually look for? Do you know any bank contact who can help on it?
Ask the builder if they want an approval or pre-approval.

If they want a pre-approval, go anywhere and get it. Usually that's all builders want.

If they want an approval, there are some lenders that offer builder mortgages with up to 2-year holds. Also, the builder will likely have a lender they are working with for this.

The approval doesn't tie you into anything. Get it done, go firm on your purchase and then start mortgage shopping when you are within 120 days of closing.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
User avatar
Feb 4, 2015
1164 posts
737 upvotes
I am in a kinda similar situation; pre-construction home. However, a pre-approval is enough.

The builder said they will get the permit to start building in November, then the actual start likely in January 2021. Closing estimated by end of August 2021. (Due to covid, I believe it may take longer).

Any chance that I can keep the rate by closing if I get a pre-approval now?

Thanks!

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