Purchase Contract Definition
A purchase contract is a document that outlines the conditions of purchase for real property.
A purchase contract can either be drafted by a REALTOR® or by the buyers and sellers themselves. At First Foundation we strongly encourage our clients to deal with professionals, and as the majority of our clients deal with REALTORS® we will speak in broad terms as to the how the contract is executed but specific terms as to how it applies to the mortgage process.
When a buyer has enough interest in a property to start a formal negotiations, a purchase contract is drafted. The purchase contract will include a purchase price, possession date and a prescribed amount of time to secure mortgage financing. Other contract elements will include:
- The municipal address
- The legal land description
- Contact information for both parties
- Lawyers representing each party.
- Any conditions such as home inspection, furnace inspection
- In case of the property being a condo, condo documents will be requested
Purchase Contract and the Mortgage Process
It is always a good idea to know exactly what you can qualify for through a mortgage preapproval before 'writing an offer' or completing a purchase contract for negotiation. However once you have come to terms on the purchase contract it is time to get that document to your mortgage broker. Typically your REALTOR® will handle this through their conveyance, however there is certainly nothing wrong with double checking everything is going smoothly.
The purchase contract forms the basis of the mortgage application as it relates to the property. The lender wants to have a copy of the purchase contract and all amendments that are made after the fact. Also, once all conditions have been met and the purchase contract is complete, you will sign a removal of conditions form, this actually makes up part of the purchase contract and should be sent to your mortgage broker as well.
Often times negotiations happen on the purchase contract after financing has already been approved. Although the changes may be very minor, it is your responsibility to submit any documentation as it may impact the lenders decision. Failure to submit documents can be found out last minute at the lawyers office as the lawyer will submit a complete purchase contract with all the mortgage documents. If there has been a material change, it could mean a lot of trouble last minute.
Consider the purchase contract as a fluid document, make sure to keep your broker up to date with all changes made to ensure a smooth purchase.
Sample Purchase Contract
Although we strongly encourage dealing with a REALTOR® as they will have their own purchase contract, here is a sample contract for your reference.
Here is some information about the home buying process.
If you would like to talk with a mortgage professional about what the home buying process looks like, or you would like a referral to a great REALTOR®, contact us anytime!