The mortgage process can seem overwhelming and daunting for the best of us. It's so great within fact, that we had to break it up into five parts!
A mortgage is a big business that involves a substantial amount of money. Your buyers will have sentiments, which is why we have developed this 5-part series to help you ease their minds. By walking them through the method, you can prepare them for what to expect. They'll appreciate your expertise and be ready to participate.
Here's the full mortgage process and what we'll cover in this guide:
Part 1: The Application
You are willing to take the first step into home ownership or, you're eager to refinance. This is a easier process to get through this.
Throughout the application process, you'll be asked for information about:
- The property being mortgaged
- Your income
- How you will pay for the down payment (if you're buying a home)
Your intermediary will draw a credit report and share it beside the lender so that they have details on several outstanding debts as well as your credit score.
If you have had a consumer proposal or bankruptcy, you will need to furnish all supporting papers before being issued a mortgage commitment.
Consumer proposal documents:
- Statement of affairs
- Discharge statement or certificate of the full performance
- List of assets/liabilities
- Dividend sheet
- Statement of affairs
- Discharge statement
- List of assets/liabilities
If your appeal falls within the lender's guidelines, they will then send your broker confinement that will outline the details of your mortgage.
- Interest rate
Ask your broker to go beyond these details with you so you understand them.
Part 2: Income Documents
Now that the application process is dealt with, it's time to verify your income to your lender. This implies you'll be required to gather the documentation attesting to your lender you can pay your mortgage on time each month. See the list below for what you might need depending on your type of employment.
Obligations vary from lender to lender, but these are the documents you will typically require to provide to support your application.
If you are employed, with a salary, you will usually be asked for:
- Your most recent pay stub
- Notices of assessment (NOA) for the last two years (ensure that no taxes are outstanding)
- A letter of employment (to include name and address of the company, job title, starting date and salary)
If you are self-employed, work part-time or are paid by commission, you may need to provide:
- A letter from the company on letterhead reflecting your start date and position
- Most recent NOA (tax returns) to ensure that no taxes are outstanding
- T1 generals for the last two years
- Statement of business activities
- Separation/divorce agreement, including child support details, if applicable
- Bank statements or company financials
- Corporate search/business license
- A statutory declaration made by solicitor stating income used for qualification, if applicable
If you receive a pension or disability, you might be asked to produce:
- T4 and T1 generals for the last two years
- Perhaps an entitlement letter to confirm the duration
- Bank statements to confirm deposits
Once you've produced the proper paperwork and sent it to your broker, your broker will send everything to the lender on your behalf.
Part 3: Your Home
Moving on to Part 3, here's where we are so far in the mortgage approval process:
Now that you've completed all your income paperwork, you're ready to provide a few more details on the home.
You are going to be asked to confirm whether you will be:
- Using it for rental income
- Using it as a second home
- Living in the home
Your broker will regulate for an appraisal of the property to confirm its value (and market rent analysis if this is a rental property). The appraisal also reveals its marketability and its state of repair. You will be entreated to pay for the appraisal up-front, directly to the appraiser. This will typically cost $350, though it can go up to $450 if it is a very large or remote home.
Mortgage for a rental property?
If this is for a rental property, you will be asked for proof of rental income with:
- T1 (if declared)
- Bank account statements (if not declared)
Mortgage for buying your home?
If you are buying a home, your broker will need to see the purchase agreement for both the property you're buying and the home you are selling (if this is the case). These will be provided by your realtor to you. Your broker will also need your solicitor's name and contact details, which will be shared with the lender.
Part 4: Down Payment
You're nearly at the finish line. It's time to talk down payment.
If you are buying a home, the lender will need to know the source of the down payment. They may require:
• Your savings account/statement (90-day history) to prove the down payment is not borrowed
• A snapshot of your investment statement
• A gift letter (if your down payment or part of it is a gift, it must be from an immediate family member)
• An RRSP statement
Your broker will present you with a template to fill in which makes this process easier.
You can also calculate your monthly mortgage using this online mortgage calculator within clicks and free of cost
Once your broker accepts all the necessary documents outlined in the confinement, along with your signed copy of it, your file will be transmitted to the lender's funding department.
Part 5: Closing
At the closing point, the lender will contact your solicitor to instruct them on the final conditions for closing. This will include how the funds should be disbursed. Your solicitor will be in direct contact with you to confirm your closing date. This is when you will sign the final documents and funds will be transferred.
Your solicitor's role in closing and documents required
Depending on your personal incidents and the conditions of your commitment, your solicitor will be asked to present your lender with some or all of the following documents. Review these with your broker ahead of time to make sure your solicitor has everything they need at the time of closing.
The documents are:
- A signed pre-authorized debit (PAD) form to set up your regular mortgage payments.
- Title insurance policy.
- Proof of subject property insurance (fire).
- Proof of identification.
- A copy of the property's title (to ensure there are no outstanding liens).
- Proof of paid personal taxes and city taxes (unless some mortgage funds are going towards paying them off).
- A payout statement to confirm the amount owing on your current mortgage.
The day of mortgage closing and what to expect
You will meet your solicitor on the agreed day of closing (this is usually determined by you, or if you're buying a home, in accordance with the seller). Your solicitor will have you sign all-important final documents. Once this is done, your solicitor will disburse the funds to the seller of the property or your prior mortgage lender and any other creditors, if instructed. Your first mortgage payment will start on the date outlined in your commitment.
That's it, you've done it. With help from your broker, surprises should be limited and your stress level should remain low. Congratulations!
To conclude, here's the entire process from start to finish: