New Build Pre-Approvals 🏡🔑

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Is it fair for homebuilders to require FIRM offers up to 1 year before possession? 🤔

The consensus is no. In my opinion, more due diligence should be done before allowing someone to hand over their deposit on a firm offer. An affordability test for future rate increases should be conducted. Additionally, in cases where unforeseen events prevent you from qualifying for a mortgage, there should be a way out. Nobody could have predicted the changes to mortgage rules, especially regular consumers.

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Understanding the Builder's Requirements 📋

Builders typically require a non-refundable deposit of 5%-10% (possibly more) when you agree to purchase a house. They also require you to get a mortgage pre-approval from their financing company options or obtain it elsewhere. Based on this pre-approval, they feel confident allowing you to waive your financing condition, making the agreement a firm offer to purchase.

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Considering Rule Changes and Rate Increases 📉📈

What's often overlooked is the possibility of rule changes and/or rate increases affecting your mortgage outcome. In past years, we've seen reductions in maximum amortization periods.  Rule changes could impact your ability to qualify for a new build especially if it takes a long time to build.  

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Ensuring Financial Stability 💰

It's essential to ensure your financial stability. I suggest doing an affordability test or having your broker or bank do it—better yet, just call me. I will qualify you at higher rates to ensure you can still qualify down the road should mortgage rates increase. Preparing for worst-case scenarios is crucial. Also, consider pre-qualifying possible co-signors to have a plan B in place.

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Important Considerations Before Entering an Agreement 📝

• Credit Inquiries: Avoid letting anyone pull your credit once you enter an agreement to purchase a house.

• Additional Credit: Do not apply for additional credit cards, loans, or lines of credit. Avoid applying for increases to existing credit accounts.

• Employment Changes: Do not make any changes to your employment situation until you take possession of your new house.

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Consult with a Professional 📞

At the end of the day, it is crucial to consult with a professional like myself to ensure you take all necessary steps to avoid losing your deposit and possibly getting sued by the home builder. Let's work together to make your new home purchase a smooth and successful experience.