Home inspections turn up issues all the time. When they do, there often needs to be a renegotiation, and that’s completely normal. What’s less well understood is how that renegotiation needs to be structured to keep your mortgage approval intact.
Watch my video or read on for more details.
Why the Purchase Price Matters to Your Lender After a Renegotiation
Your mortgage is based on the purchase price of the home. If that price changes after the inspection, the approval needs to be amended to reflect the new number. This is especially important if you’re putting less than 20% down, where the loan-to-value ratio has to stay within specific limits.
It sounds straightforward, but there’s a common workaround that causes problems.
Why Doesn’t Seller Credit Work When Buying a Home?
Sometimes a seller doesn’t want to do the repair work or formally reduce the price. Instead, they offer to give the buyer a credit at closing, like $500 or $1,000, to cover the cost of the repairs.
That arrangement won’t work with most lenders. From their perspective, the purchase price is still the original number, and the credit is a side deal that doesn’t show up in the mortgage calculation. If there are deficiencies with the property that affected the price negotiation, lenders want to see either the work done or the price formally reduced, not a cash credit at closing.
What Do I Do If The Home Inspection Turns Up Issues?
If the inspection turns up issues that change what you’re willing to pay, the cleanest solution is to renegotiate the purchase price directly. That gives your mortgage broker what they need to get an amended approval in place before closing.
Whether you are preparing to buy your first home or your fifth, if you’re looking to get pre-approved for a mortgage in Edmonton, fill out my online application. I’m here to help you every step of the way.
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’m trusted partner who will help you get the right mortgage for your home or investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.
