How The Mortgage Process Works
Understanding the process involved in obtaining financing for your home is important. As Mortgage Professionals, we handle everything from your pre-approval to securing the best mortgage rate that works for you.
Our mission is to make this process as simple as possible. Let’s take a closer look at the steps involved and educate you with the information behind them.
Step 1 – How Much Can You Afford?
Before you begin to look for a home, you should have a clear picture of what you can afford in terms of price, down payment, fees, and other expenses.
Consider the cost of living in the home. How much will it cost to heat monthly? What about the monthly cost of insurance, electricity, water, maintenance – painting, repairs etc.? If you are considering buying a condominium, how much are the monthly management fees? How will they affect your ability to carry on a mortgage?
Predicting the cost of living in a home compared to living in an apartment can be difficult. There is a rule of thumb to help you estimate the difference between the two. Take the value of the home you are considering and multiply it by 3 per cent. Then divide that figure by 12. In our example of the $290,000 home, the monthly cost using this formula would be roughly $725 in addition to mortgage and taxes.
Before you find the home of your dreams, make sure you can afford it first!
Step 2 – The Mortgage Application
A typical mortgage application is not very complicated. We are looking for some information about you and whoever is going to be on the mortgage with you. You will need to provide your SIN (Social Insurance Number), employment information – how much you make and how long you’ve been there, where you live and how long you’ve lived there, how much debt you have, what your credit is like (past and present), and your financial net worth. All of your information that is relayed is strictly confidential and is 100% secured.
Once you have filled out our mortgage application, you will be asked to sign two consent forms that allow us to update and review your credit bureau.
You can apply online today using our Online Application Form
Step 3 – Let’s Get You Pre-Approved!
Your pre-approval is generated from a lender. A lender provides the financing for your mortgage, often bank or financial institution. At Mortgage Link, we have access to over 20 Lenders to find you the best mortgage rate that fits your needs.
Check out our Lenderspage to see some of the companies we are associated with.
Your Mortgage Application will then be submitted to a lender for pre-approval and may require more information on your financial situation.
Arranging a pre-approved mortgage is one of the most important steps in the home buying process. It not only protects you in the event of an interest rate increase for up to 120 days, it also provides you and your Realtor with a price range for looking at homes. With a mortgage pre-approval, you can shop with confidence.
Step 4 – The Approval
Many confuse the terms “Pre-approval” and “approval”. If you are pre-approved for a mortgage, yes you may go shopping for a home – but it doesn’t mean that you are guaranteed a mortgage!
The approval is supplied by the lender when all of the information we relayed to the lender is verified! For example, we will have to supply the lender a letter of employment and a paystub to “verify” that you make what we’re telling them.
Certain different conditions of verification will be called upon for the different information that we supply the lender. We will communicate with you with what documentation the lender requires to approve your mortgage application.
Be prepared to submit the following documents:
- Job Letter – A letter from your employer (on company letterhead) stating your wage amount, guaranteed hours, state date and position, name and title of person signing the letter.
- Two Most Recent Paystubs
- Last 2 year’s T4’s
- Last 2 year’s NOA’s (Notice of Assessments)
- Child Tax Benefits (if applicable)
- Down Payment Information
- 3 Months Bank Statements showing proof of down payment in your account(s)
- Signed Gift Letter and Deposit of Gift into account
- Photo Identification
- If Divorced:
- Signed Separation Agreement
- Divorce Decree
- Current Mortgage Information (if applicable)
- Debts Paid
- Lawyer Information
- MLS Listing of Property
- Signed Counter Offer
- Accepted Offer to Purchase
- Signed PCDS (Property Condition Disclosure Statement)
*There may be more information the lender will require and it is in our hands to update you on any outstanding conditions required. We prepare your documents for the lender and it is critical this information is taken care of as your mortgage will not be funded if the lender does not receive any outstanding information prior to possession date.
As long as you are prepared to submit your information, the easier the process will be. Once your mortgage is approved, you will sign a Mortgage Commitment outlining your mortgage product and rate. You must review these documents prior to signing and make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate.
Step 5 – The Closing
Once all the conditions are verified, the lender will package your mortgage and send all information to your lawyer.
The lawyer will work on your behalf to review the following:
- The Offer to Purchase
- The Mortgage Commitment
- Any potential encumbrances, liens, easements, restrictions, encroachments, or other claims registered on the title.
- Contact the lender to arrange transfer of funds
You will meet with the lawyer shortly before closing date to review and sign closing documents. On closing day, your lawyer and the seller’s lawyer will exchange documents, funds, keys and register all documents on title. There are also several fees associated with obtaining a mortgage and transferring property ownership which you will be expected to pay at closing.
After reading this, we hope you now understand your key role as the borrower. You’ll submit your information and any necessary documents, look for your new home, and we’ll take care of the rest!
Contact us today if you have any questions, or visit our website for more information.