Humber/Ontario Real Estate Course 2 Exam Practice

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When setting a timeframe for a mortgage financing conditional clause, what should be considered?

  1. A buyer's market allows flexibility to extend time frames

  2. A longer time frame might be needed for a high-ratio mortgage

  3. A standard time frame of 25-30 days is typical

  4. A seller's market implies no extensions are needed

  5. All mortgage time frames are fixed at 15 days

  6. No time frame is required in the agreement

The correct answer is: A longer time frame might be needed for a high-ratio mortgage

When setting a timeframe for a mortgage financing conditional clause, it is important to consider that a longer time frame might be needed for a high-ratio mortgage. In a high-ratio mortgage situation, where the down payment is less than 20% of the purchase price, there are additional steps and requirements involved in securing the mortgage approval. These additional steps could include obtaining mortgage loan insurance from a mortgage insurer like CMHC, which might take more time to process. Therefore, a longer time frame would be necessary to ensure that the mortgage financing is approved before the condition expires. Option A is incorrect because a buyer's market or seller's market does not necessarily dictate the need for extending time frames for mortgage financing conditions. Option C is incorrect as there is no fixed standard time frame for mortgage financing conditions. The appropriate time frame can vary depending on the circumstances of the transaction. Option D is incorrect as a seller's market does not imply that no extensions would be needed for mortgage financing conditions. The need for extensions is dependent on various factors beyond just the market conditions. Option E is incorrect as mortgage time frames are not universally fixed at 15 days. The time frame for a mortgage financing condition should be based on the specific requirements of the transaction. Option F is incorrect because a timeframe for mortgage financing is indeed required in the agreement to protect the buyer's interests and provide a clear deadline for securing the necessary financing.

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