After diligently saving your pennies and carefully managing your credit to be as strong as possible, you are finally ready to start house hunting for that perfect dream home.
Between you and your new life lies the seemingly terrifying mortgage process so let’s go over what you can expect so there are no surprises along the way.
1. Pre-approval – the first step should always be to choose a great mortgage professional. Referrals from friends and family and your real estate agent can help with this. You are trusting the largest loan you are likely to take to this person so make sure they know what they are doing. They are going to take an application, pull your credit and determine what your maximum purchase price will be. You will be asked to provide a whole bunch of paperwork to verify your information
• Letter of employment and pay stub
• Down payment verification
• Two year’s Notice of Assessment and/or T4’s
• Void cheque
This list is the very least of what you may be asked for.
If you are self-employed, separated, previously bankrupt, new to Canada, receive bonuses or many other scenarios then you will likely be asked for much more.
Given the current state of the economy and the record levels of attempted mortgage fraud, the banks have to be very careful these days.
The other real benefit to the pre-approval is that you can house hunt with confidence knowing that your entire situation has been assessed. You will not look at homes out of your price range either which can save you the heartache of falling for a home you cannot afford.
It also makes your offer very strong if you find yourself in a competition with another buyer.
2. Approval – hopefully you provided the bulk of the paperwork for the pre-approval but you may be asked for updated information such as a more recent pay stub or bank statement.
At this point your application is reassessed by the lender.
They will take a look at the property you are purchasing and make sure it fits their guidelines. Then it is sent off for mortgage default insurer approval and once there you will get the official approval to sign. Make sure that you do not remove the financing condition until all lender conditions are met. Your mortgage professional will tell you when that is.
3. Final steps – once you have met all of the conditions, the lender will send the paperwork over to the lawyer’s office. It takes the lawyer a few days to get things ready for you to sign and when you go you will be asked for the balance of the down payment in the form of a bank draft, two forms of ID and a void cheque.
The day of funding, the lender sends the funds to the lawyer who sends them to the seller’s lawyer who upon receipt of the funds gives the all clear and you will be given the keys to your new home.
It is a great idea to call your lender a bit after the mortgage closes to make sure everything is set up the way you wanted.
Make sure to ask questions at each stage of the mortgage process.
The onus is on you as the person signing the contract to understand the loan you are being offered and the terms it comes with. There are so many resources available to you as a home buyer that it is easy to learn a bit about mortgages before you sign.
It can seem a bit daunting but we broke it down into bite size pieces so you will be ready to navigate it like a boss and before you know it the realtor will be handing you your keys and your new life can begin.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.