Does finance approval still stand if contract falls over

Hi guys,

First home buyer here so please be nice. I have a contract on-foot and according to my broker, NAB has backflipped on their policies and denies my guarantor loan (mother's property being guarantor property). We found out last Thursday and finance was due Friday. We have been granted an extension of finance to this Friday, but solicitors have said no more extensions.

Last Friday broker put an application thru to St George. Lets be honest, its not going to come back in time and I am preparing myself to lose the house - however I have a Q. I see my only chance at getting this house is to obviously successfully get another extension, however if that fails, I tell the agent that i'm pushing thru to get the finance and if seller has no one else lined up behind me.. he can give me another shot.

Heres the tricky part. My broker says if the contract falls over on Friday due to finance not coming thru in time, we push on with our finance application, and it turns into a 'pre-approval' with St George. My thoughts were.. why would the seller give me another chance if I have to go thru the finance application process again due to entering into another contract with him? Will St George honor their approval even if a new contract has been entered into days after the first one fell over? Or do I have to start the process from scratch..

I hope this is making sense. I am expecting him to pull out on Friday because he doesn't think I can get the finance. But if I go back to him mid next wk with my approval/pre-approval from St George.. he may give me another shot.

I'm not even thinking about whether the broker stuffed up my application with NAB, or if he is telling the truth abt them changing policies at the last minute. For now i'm just trying to see if i can get this house still, and i'll deal with the broker/NAB abt that afterwards..

Thanks alot guys.

 

Your broker is correct.

If the contract falls over - then have the St George application rolled into a pre-approval.

If the vendors change their mind and decide to sell to you again - then your broker will just need to let St George know and they'll convert the pre-approval into a formal approval. There's no need to submit a new application and start the process again.

Cheers

Jamie

 

Hi Ape,

If you have a pre-approval, all you need to do is present the new contract and all should be well. If it's exactly the same as the first application, it should get approved very quickly. If you buy a different house, it should still go though quickly after being amended.

It's usually a much quicker process than applying from scratch.

 

Hi Jess and Jamie,

Wonderful. Thank you so much. I suppose from the seller's perspective, he will have to go through this with someone else (unless the agent has a cash buyer lined up). So I hope I can convince them to hang on a little more, or they talk to me next wk when I should have finance sorted.

Thank you again.
Ape

 

STG are my go to bank for family pledges as they have the best policies. They can take second mortgage over guarantors property, guarantors can use the owner occupied and they do not need to service the loan.

If STG can't do the deal, most likely nobody else can. Get the broker to order upfront valuation on the guarantors property and the new purchase and also find out out why NAB declined the loan.

Do your parents have a loan secured against their property?

STG are pretty quick and generally assess loans within a day or two. Only issue is if a second mortgage is required the bank won't approve the loan until your parents bank provide consent/deed of priority.

 

Hi Watson, thanks for your comment.

Yes, there is loan(s) secured on the guarantor property - NAB. Parents have dumped $300k straight onto the mortgage to create equity. Waiting on NAB to lower the limit and release the loans so that it is a stand-alone property and NAB seem to be taking their time in doing this. It has been escalated since Friday. All in all, I think this broker has lead me up a garden path without doing the proper background check on the guarantor property and its only after i've signed a contract that he has realised the above. Perhaps this is why NAB truly declined the loan? I don't know but will look into it soon.

St George have the application on hands and valuation was done on new purchase on Friday, and guarantor property tomorrow. I'm just going to have to hope that seller gives me another shot when this has all sorted out. If I knew it was going to be this dreadful, I wouldn't have signed a contract! =(

 

Hi Wylie,

Yes. I'll try my hardest to get another extension.

 

Thanks Wylie, I think for now the process of getting the limits reduced has started with NAB. Once thats done, they can't redraw that cash.
Its all a huge mess =( and it seems like once we start something to try to resolve the problem, another option pops up, but its too late to start the other option. It has truly been the worst 'buying first home' experience.
I hope St George come through. If they don't, i'll be getting off this rollercoaster for a while and I guess trying to keep saving $100k deposit so as to not go through this guarantor process again.

 

Don't be disheartened - it's all a learning experience and most likely for your broker too by the sounds of it!

No need to save $100k - if this sale falls over, you have time to get the guarantee right without the pressure of a finance clause hanging over your head. It'll work out - there'll be another house just around the corner. Maybe even literally.

 

Thank you for being so kind Jess! I really appreciate it. Thats right.. there is always another house! =)

 

Call the agent and explain the situation, or get your broker to. While they aren't the decision makers, they can speak to the vendor. The agent doesn't want to have to sell the property again.

 

Just explain to agent and get solicitor to keep others solicitor in the loop, your not stalling, things take time and lenders do change policy quickly.

Vendor will likely be ok if communicated with openly and honestly.

PS yes, if you get approval, it can be used on any contract in price range and LVR and suitable as security, usually for 90 days from pre approval.

 

Thanks Tobe and Dabbler. I am anxiously waiting for info from my broker today and tomorrow. My plan is to call the agent tomorrow and like you suggest, be honest about the whole situation. I guess I would like something in writing from broker/St George to help prove that this approval could indeed be around the corner.
My mum confirmed last night that NAB has now lowered her limit on her redraw. Now the final step is to get the loans removed from that account, which the broker has had 'escalated with NAB since Friday'. Does anyone know how long this usually can take?

 

Hi Wylie

Interested to know how the loan to your children can be done properly in the eyes of the tax law.

Do you have to sign agreement with your son how much he borrowed from you and what amount he could pay you and when it should be paid by.?

Do you use a solicitor to sign the agreement?

If your son does pay you on a regular basis without interest, how you would recoup the interest you may be charged by your bank?

and'

If your son does pay you on a regular basis including interest, how you would declare this in your tax return?

Your response is much appreciated

 

I've borrowed money from my parents for property, (nowhere near $300k though, just $25k they had sitting around). It was all informal, no real documentation, just noted via email. I paid them back every fortnight from my pay, they were fine to have it all as an interest free loan.

 

You can lend to anyone, including children (adult or minor).

If interest will be claimed the ATO will want to see a written contract (contracts can be oral) with arms length terms - commercial terms similar to what you would do when lending to strangers. It must also be transacted in conformity with the loan agreement. If you agree to have repayments made by monthly instalments and none are paid this may be evidence of the loan not being on arms length terms - especially if there is no enforcement of the default.

A loan is not a mortgage and a mortgage is not a loan. a mortgage is a form of security, a lien over the title of real property. A loan is a transfer of money which must be returned.

 

Did you get the property?
Marg