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BC Mortgage - Steps in the mortgage process |
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You don't want any surprises when entering into the largest transaction you'll ever have. So, I've outlined the steps you can expect to happen when obtaining your first home mortgage. Note: Please do not consider this as legal advice. Legal advice can only be provided by a lawyer (which I am not).
Please visit my video page to watch our First Time Home Buyer Video. Click the image or here to go to our home video page.
Step 1 - Mortgage Application
The first step in obtaining a mortgage is the application stage. Here is where I obtain the information I need to obtain a pre-approval from a lender. A pre-approval gives you a reasonable assure you of the amount you are qualified to borrow. In addition, the interest rate is held for you for a specified number of days, typically between 60 to 120 days. Most lenders guarantee the lower of the pre-approved rate and the rate at closing. Note that a pre-approval is not a guaranty of approval. Once you have found the property, the lender will do a complete review of your application, documentation and the property before they give you a commitment letter.During the pre-approval term, interest rates may go up or down. As your mortgage professional, I watch the rates so that as the rate goes down I advise the lender to adjust their rate to the lower rate so that if the rate rises, you get the lowest rate during the period.
For example, if the pre-approved rate is 5.0% and a month later the rate drops to 4.25%, I will advise the lender to lock-in the rate at 4.25%. This ensures that if rates rise, the lender is committed to the 4.25%
Click here to learn about our unique approach to obtaining a pre-approval for you.
Gather the following
documents: (1) Employment letter (click
to see a sample) and pay stubs; and (2) Bank statements
for 3 months confirming down payment and closing
costs. It helps to have these documents so you can
work with a seller with a tight deadline.
Documents you may be asked to sign/provide:
1) Invis' Client Agreement - Authorizes me, the mortgage broker, to obtain credit information and share with the various lenders. Asks you whether you are interested in mortgage life insurance.
2) Form 10 - Conflict of Interest Disclosure Statement (BC Registrar of Mortgage Broker's form) - Discloses that Invis and myself are paid by the lender
3) Salary Letter - Certification provided by your employer which confirms your salary and status with the company.
4) T4 - Statement of Remuneration paid
5) Gift Letter - If the down payment is being gifted to you, you will need a letter from the person who is giving you the money to sign this letter.
Step 2 - Mortgage Pre-Approval
After analyzing the information you provided in your application, I will submit the application to the lender. In most cases, I get an approval from more than one lender so that you have more than one option.If your application is non-standard (e.g., you may have had credit problems) or the interest rate is higher than normal or there are broker fees, I will advise you of these added costs.
Some lenders are able to respond with a pre-approval within the day while some may take longer (sometimes up to 2 weeks depending on the work load). If there are unusual delays, I will let you know.
The pre-approval will state the following:
1) Mortgage amount
2) Term
3) Interest rate
4) Expiration date of pre-approval
5) Required documents
Some institutions provide a rate hold certificate. This type of document merely holds the rate for the period. The mortgage amount is based on the salary information relayed by the broker to the lender. The lender will not verify this amount until the borrower has made a offer to purchase a property.
Remember a
pre-approval qualifies you, the borrower, not the
property. Once the property is found, I need to
qualify the property.
Documents you will get:
Mortgage Pre-Approval (sample will be different depending on the lender) - Document provided by the lender showing you the amount you qualify for, the interest rate and terms of the mortgage.
Step 3 - Offer to Purchase
With a pre-approval in your hands, the next step is to shop for a home. I recommend that you work with a realtor to help you find a home. A realtor has access to more properties than you do. In addition, they have the expertise to help you negotiate the best price and terms since they have access to market information. Lastly, there is no cost to this service since they are paid by the seller.Once you've made the offer to purchase, I need to qualify the property. Depending on the lender, I will need the following documents:
1) Offer to purchase
2) Multiple Listing Service Printout
3) Property Condition Disclosure Statement
4) Strata minutes (condos)
5) Appraisal (if not insured by CMHC)
6) Salary letter and Bank statements (if not yet submitted to the lender)
7) Contact info of lawyer/notary
These documents are faxed to the lender. After reviewing the documents, a commitment letter is issued. The commitment letter will state the terms of the loan, interest rate and any missing documents that need to be submitted to complete the transaction.
Even if you have a pre-approval, it is wise to include in your offer a subject to financing clause. This means that if you are unable to obtain financing, you can still back out of the deal. Remember, a pre-approval qualifies you, the borrower, not the property. The lender can still disapprove the purchase if they don't like the property (e.g., leaky condo).
Subject Removal Date
is a very important date from a financing standpoint. Typically, you've made your offer subject to certain
conditions (e.g., obtaining satisfactory financing,
satisfactory property inspection). A date is set in
the contract where you remove the conditions. Once the
conditions are removed, you are committed to purchase the
property without conditions. If obtaining financing
was a condition, I need to have had obtained an approval
from the lender that all the documents you have submitted to
the lender are acceptable. If you remove subjects and
are unable to complete, you could be sued for breach of
contract.
Documents you may be asked to sign/provide (click the link to see a sample):
THIS STEP HAS 2 PARTS:
The first part is qualifying the property
1) Offer to purchase - contract between the buyer and seller stating price and terms of the purchaser (Ask your realtor)
2) Multiple Listing Service (MLS) printout - Information on property (ask your realtor)
3) Property Disclosure Statement (PDS) - Document that contains a statement from the seller as to the condition of the property (ask your realtor).
4) Appraisal - Report prepared by an appraiser that attests to the value of the property. If the mortgage is insured by CMHC or GE, appraisal is not needed. I will advise if you need to get an appraisal
5) Strata Minutes - Some lenders require that you provide them with strata minutes. I will advise whether you need to get this.
6) Home Buyer's Plan Request To Withdraw From An RRSP - Canada Customs and Revenue Agency's form which is submitted to the financial institution holding your RRSPs requesting a withdrawal from your RRSP account.
The second part is Removing Subjects
1) Mortgage Commitment letter - If lender accepts the property, they will issue a commitment letter. The letter will state the terms of the mortgage and any other documents they require to complete the transaction. A mortgage commitment letter without any major conditions assures you that the lender has accepted the terms of the deal. This gives you comfort to remove subjects.
2) Void Cheque - Lenders require a void cheque and maybe a pre-authorized debit form so they can deduct the mortgage payments from your bank account.
Step 4 - Completion
At this point, most, if not all, of the requirements of the lender have been satisfied. The ball is at the lender's court to transmit the documents to the solicitor of your choice (most lenders allow you to chose your own solicitor).The lawyer (or notary) will contact you when you should come in to sign the documents. Signing may be the day before closing or sometime before that date. The lawyer will advise you as to how much money you need to bring to cover the down payment, legal fees, and other closing costs.
That's it. You now own your own home!
Documents you may see/sign at the solicitor's office:
1) Solicitor's consent form - States that the solicitor acts for both the borrower and the lender.
2) Purchaser's Statement Of Adjustment - Calculation showing amount you need to bring in to the solicitor's office. The amount includes your down payment, legal fees, property transfer tax, and the buyer's share in expenses (property taxes, condo maintenance fees, etc.)
4) First Time Home Buyer's Property Transfer Tax Return - Calculates the Property Transfer Tax Return for a First Time Home Buyer.
"My job is done when you know your options"
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