Many buyers seem to think when a bank gives them a pre-approval with a rate on it that this will guarantee a mortgage. That is not true! At best a pre-approval will guarantee you a rate if the bank approves your property. For mortgage specialist who do not examine your documentation before hand, there is even less of a guarantee.
When you have less than 20% down payment, you will have to get mortgage default insurance which means the insurance company also has a say on your property. There are many condo towers that insurers do not lend against because of large assessments or on-going repairs.
Other property specific issues that might derail your mortgage approval are commercial zoning, self-managed properties, age-restrictions, property on leased land, oil tanks, asbestos and Kitec pipes to name a few.
If I had a former grow-op with a mould problem and a crack foundation and an oil tank buried in the back yard, this would be the time to slap a coat of paint on it and push it into the market. Set a low price and watch the bids come in. Pick the offer with no subjects and laugh myself to the bank. Don’t be the person on the other side of that deal!
Your pre-approval will not save you here. No lender will proceed with this loan. The best outcome here would be to lose your deposit. Remember the first rule of investing. Never lose money. It is always harder to make up for money you have lost.
