Pre-Qualification
This is where we as Mortgage Planners shine! Traditionally this is the beginning of any property purchase. A Lender will be presented with information gathered (such as income and debts); to determine the amount and payments of the mortgage for which you qualify. This mortgage amount plus down payments and other incentives will establish the price range of the property you can purchase.This step is crucial in finding out the most advantageous terms and conditions offered by the Lenders.
Each Lender has its own unique and specific terms to follow and your own circumstances will find a very select group of lenders to consider. Therefore it is always best to be qualified before looking for a home to avoid disappointment and avoidable expenses. We will do this for you.
A wonderful opportunity exists at this point in the mortgage process to establish what payments can be approved and more importantly, what payments you want to pay. You are always the centre of attention with us and your REALTOR, so stick to a price and payment that matches your personal tastes.
The Lenders will want to establish your ability to pay as well as your willingness to pay. In general, a person who borrows for their personal residence will be more inclined to make the mortgage payments than, for example, a person who has borrowed for a rental home. Your willingness to repay is also suggested by your credit history and how well you have repaid loans in the past.
Lending is sometimes more art than science it seems, and therefore these rules and conditions are not carved in stone. The wonderful news is that banks have money to lend, and they really want you to qualify. Using all of the information available and understanding each bank's terms and criteria are critical steps to finding the very best mortgage for you. That is what we do best.
Mortgage Programs and Rates
When choosing from the many programs and rate offerings, it is important to analyze your needs in detail. If you plan to own a home for just a short time (perhaps only a year or two), then a short-term open or variable open mortgage may make the most sense. If you plan on owning for a long period of time, then all mortgage terms need to be considered, including a fixed-rate term mortgage.
The time and frustration involved with searching out mortgage terms and rates can be overwhelming. Low rates may be offered with exit fees or restrictive terms that diminish the attractiveness of the rate savings. We evaluate a borrower's situation and make a fair assessment of the options. We provide you with all the information to make an informed decision.
The Application
This is the very start of any mortgage submission. Normally a Lender or a broker agent will work with this process for 1 to 5 days at the very start of the process. During this time, the Borrower will provide all of the documentation to the Lending Specialist, that's us, where it is compiled and analyzed. Too little information can lead to delays or extra costs that could be avoided.
During the application process, all the fees, costs and terms associated with the application should be discussed.
Processing
We will offer mortgage solutions either right away for straightforward deals or within a few days for the more complicated applications. After the application information has been gathered, it is usually followed by credit reports, appraisals, title searches and other information gathered from real estate firms as may be required.
Another important part of any application is verifying the information given. This usually entails Revenue Canada reports and assessments, employer contacts and title searches. Ensuring that income taxes and property taxes have been paid is another important step.
If your application or subsequent credit assessment contains derogatory information or evidence of late payments; a written explanation of these conditions may be required. Remember that bad things can happen to good people, and a good mortgage professional will help determine the proper course of action. Remember, Lenders want to make you qualify if at all possible.
Appraisals and other methods of property evaluation will ensure that the purchase price or home valuation is supported by market conditions. The entire mortgage package is then packaged and submitted to Lenders for approval.
Required Documentation
Depending on the mortgage program for which you qualify, there may be a wide range of documentation to gather to support your application. Generally speaking, if you are a wage or salary worker and are buying or refinancing a home, then you should be prepared to have the following:
a) Recent month's pay stubs
b) Last years Revenue Canada "notice of assessment"
c) Letter from your employer outlining you job, how long you have worked there and your present salary.
To speed things up you may also be required to provide your investment and RRSP statements to support your net worth.
If you are a business owner, then regular pay cheques and tax returns are harder to gather. Therefore be prepared to provide 2 years' worth of your tax returns, 2 years Revenue Canada "notices of assessment", company GST return for last year, and a copy of your current business license. The incomes shown on these documents may not be factored in to the approval. Instead, your stated income should make sense and be reasonably supported by net worth and personal property.
For refinancing situations, it is important to declare why you need the funds. Possibly an explanation can be prepared in advance in written form. However, most of the time the need is self evident, such as debt consolidation, and balances may be easily verified by credit reporting and your bills.
The final results should be processed with the help of a mortgage professional who uses all the Lenders and all the programs available to fit your need. Some programs are surprisingly easy as long as you know what options are available.
Credit Reports
Normally these reports are accessed directly by your broker on your behalf. You can also order these reports directly yourself for your own review. However, for your mortgage application you will leave this report to be ordered by your Lending Professional. An important aspect of the report is to not have too many enquiries made as a lot of enquiries may harm your credit. This is why it is more important than ever to use the services of a good Lending Professional or Broker to minimize the enquiries and preserve your credit report standing. The credit report gives a general history of your loans, lines of credit and other borrowings to recent date. It gives a picture of who you've borrowed money from, how regular your payments are, and general terms of those loans. The report will also give a history of your personal information as well as any "derogatory" items that may be in your history. For instance, circumstances such as bankruptcies, collections and late payments are noted in the report. This type information is generally deemed to be of "public record". What you won't find on the report are things like your race, religion, criminal records, political preference or anything of a personal nature.
If you have had credit issues in the past or present, be prepared to discuss them with your broker or Lender at the earliest opportunity. This will save you time and allow your experienced Broker to work through the application carefully. It is important to note that while credit scores and bureaus are very important to your application, they are not the last word in your approvals. They instead tend to regulate the type of rate or terms you will be offered.
If you suffer from a poor credit report or score here are some ways to improve your credit:
Appraisal Basics
Lending values are determined through various automatic or reporting options. Most Lenders will establish early on what type of report, if any, they require. The technological advances in this industry have given rise to new property-evaluation programs that reduce the time needed to underwrite and approve mortgages. This new technology also saves you money if the Lenders don't require a lengthy appraisal report to be written.
If you require a full appraisal report it will usually take a few days to prepare. The appraiser will need to visit the home and assess the property, home, and improvements for their use and value. They will be judged on age, condition, usage etc. Considerable research and collection of information is required to produce a final report and evaluation.
Most residential appraisals consist of three common approaches to value. The Cost Approach determines the replacement value of the existing improvements at the date of the report. The report includes any depreciation, obsolescence, or wear on the property that tends to decrease value.
The second method, Comparable Approach, determines a value based on similar homes or properties that have sold recently in the area. The report mitigates any errors by using comparables or "comps" of similar size, age and functionality to the property in question.
The Income Approach is primarily used in rental properties or commercial holdings that earn income. This evaluation is tailored to an investor's goal of return on investment and what normally one would pay for such an invested return.
Underwriting
When all the documents and information have been received, the Underwriter is responsible for putting the whole package together for final analysis. If the information warrants it, an approval is issued and a commitment letter sent for review by the Borrower. If the documents don't support an approval, then the Underwriter may ask for more information prior to further consideration.
Closing
When a loan is approved the file is transferred to another Lender department called the "closing or funding department". This department notifies the Lawyers and Brokers of the status of the file and what the final terms are. If any fees are required, they are communicated to the Broker for verification along with any closing fees, high-ratio premiums etc.
At closing the client sits down with their lawyer to review the paperwork on the mortgage and sign any forms required to complete the financing. At closing the Client should be prepared to do the following as directed by their Lawyer:
- Bring a certified draft / cheque for any of the costs associated with the down payment or closing of the mortgage
- Review final documents together with the Lawyer. Try to accomplish this part of the transaction well in advance of the "completion date". That way if any irregularities come up there is still time to make changes.
- Sign the loan documents
- Bring full identification with you, including at least one piece of official picture I.D. such as a passport, Driver's License, or BC ID.
Once all of the documents are signed and approved the completion, your Lawyer returns them to the Lender for processing. The Lawyer also arranges the funds to be transferred in proper order to all parties associated with the sale of the property including vendors, government taxation offices, title offices, REALTORS®, brokers etc. There is very little the client can do for themselves at this stage, as it is handled for them by their Lawyer.
At the end of this period the following generally happens in the case of a home purchase:
1. Title of the home is transferred into the name of the purchaser,
2. The Purchaser's down payment funds are added to any mortgage funds and paid to the Vendor. If there are any charges previously on title these will be dealt with by your Lawyer to remove any that shouldn't be left over from the previous owner.
3. Mortgages (if any) are filed in the Land Title Office on the property title in favour of the Lender.
Before all this starts we need to hear from you. Phone or click on Apply and see the next step and the application options open to you.
