It is always nice to know what to expect before you head into a new situation and applying for a mortgage is no exception. This week we are going to take a quick look at what to expect and what you should bring to make the process silky smooth.
Choose your professional – your home is likely to be the largest purchase you will ever make. It stands to follow that you want to make sure the person helping you is the most qualified. Referrals from your realtor, home builder, or other professional is a great place to start. Consider asking your friends and family too. Here are a few things to consider:
• Are they able to explain clearly all aspects of the mortgage? As I have said time and again, there is way more to a mortgage than rate.
• Do they get back to you in a timely manner?
• Are they friendly and professional?
Gather your paperwork – you are going to have to provide all of the documentation at some point so you may as well do so ahead of time. This will allow your mortgage professional to offer you a solid pre-approval and help you mitigate any problems. Here are the documents you will need.
1. Letter(s) of employment
2. Recent pay stub(s)
3. Two most recent years Notice of Assessments from the CRA
4. Ninety day history of any and all accounts you are using to make up the down payment.
5. Void cheque
6. Government issued ID
If you are self-employed you will also need:
1. Two year’s T1 Generals
2. Two year’s financial statements
Specialty Documentation you may need depending on your situation:
1. Divorce/separation agreement
2. Bankruptcy discharge documents
3. Proof of debts/collections paid
4. Proof of taxes paid
5. Mortgage statement and offer to purchase on your current home
6. Lease agreements, mortgage statements, property tax bills on any rentals
It should be noted that your lender will ask for all of the above and likely more. If you were lending someone $300,000 + you would want to make sure all t’s were crossed too.
Apply – it’s finally time to do the application. You are going to be asked a series of questions and your credit is going to be pulled. Here are the credit criteria the lenders are using.
• Two trade lines reporting for two years – a trade line can be a credit card, a line of credit, a vehicle loan but ideally you should have one credit card and the other can be any of the others
• No late payments
• You are not exceeding 75% of your available credit limit
• Normal levels of credit Inquiries
I will tell you that credit cards and mortgages now report on your credit bureau so make sure they are both paid on time every month.
Information is abundant these days so it truly is easier than ever to familiarize yourself with mortgage lingo. You are signing a binding contract for a time frame of 1-10 years so taking an hour up front to understand the terms is a good idea. I promise that your mortgage professional likes it when you ask questions so feel free to ask away.
And there you have it. What to expect from the mortgage process. It’s not that scary at all really now is it?
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.