As told by Michael Wharmby, Mortgage Broker and Owner of Innovative Mortgage Solutions.
In August of 2016, I spoke with a couple looking to purchase their first home together. We discussed the details of their financial situation and I was able to obtain a pre-approval from a lender while they started house shopping. A few weeks later, they called to let me know that their offer on a home had been accepted and I began the process of getting them approved for financing with the same lender that had pre-approved the couple. I received the approval just a few days later, and my team began working to satisfy the conditions of the approval.
The very next day, we ran into an issue where the lender would not allow the down payment to be loaned from the couple’s immediate family. With the condition of financing requirement due in just five short days, we had to come up with an alternate solution to the problem before those five days were up – or the approval would be void and the couple would face potentially losing that home.
Because the down payment could be a gift, but not a loan, the couple’s grandparents graciously offered to gift the couple the money. In cases where a down payment is gifted, we are generally required to submit a letter to the lender stating that the money does not need to be paid back and have that letter signed by the person providing the gift. Usually, this would not be a problem – however, we quickly learned that both grandparents are blind and would be unable to sign the letter on their own behalf. Because the couple’s father had Power of Attorney, we had him sign the letter and we submitted it to the lender. The gift letter was promptly declined by the lender, who stated that they do not allow gift letters to be signed by Powers of Attorney.
The couple was, understandably, quite frustrated with the lender at this point; Power of Attorney is specifically put into place so that an authorized individual is able to act on behalf of those who are unable – but the lender was firm with their decision. With such a tight time-frame, the couple was, again, worried that they would lose out on the home. With virtually no avenues left to pursue with this lender, we were left to seek out a new approval from another lender entirely.
We brought the deal to a new lender that we have an excellent, longstanding relationship with and explained the urgency of the situation. With just four days left before the client’s possession date on their home, we were able to get the couple approved and the deal closed with no issues over the gift letter and Power of Attorney.
Because we represent our clients and are not tied down to one specific lender, we have the ability to pursue several options in cases where the original lender is not willing to work within the parameters of a certain situation. To discuss your options, contact our office to speak with one of our certified Mortgage Brokers today, and be sure to follow us on Facebook or Twitter for the latest in Canadian mortgage news.