Home Panel

The Mortgage Process

Step 1: Pre-Approval

When you first decide you want to purchase a home, it is wise to get a pre-approved mortgage.  The pre-approval will tell you how much of a mortgage you qualify for, ensuring you are looking at homes in your price range.Luckily, you're in the right place! I can arrange a pre-approval quickly and easily. Please click here to apply now.

Step 2: House Hunting

Once you know your price range, your REALTOR® will begin researching the available properties and will show you homes that fit your criteria.If you do not have a REALTOR® please let me know, I can give you a list of reputable ones.


Step 3: Offer In and Accepted

Once you’ve found the home you are interested in, you will make an offer. The offer will be “subject to financing,” meaning that the offer depends on whether or not you are able to obtain a mortgage. Your offer may also have other conditions, such as “subject to a satisfactory home inspection” or “subject to review of the condo documents.” Once the offer is accepted, you will provide a copy of the purchase agreement to me so I can get started on your file!

Step 4: Lender, Insurer, Appraisal

This is where my job really begins. I will work with the lender, insurer, and appraiser to get you final approval on the financing. If your down payment is 20% or more you will usually require a property appraisal. I may may ask you for further documentation at this time depending on the specifics of your file. You will need to collect the requested paperwork and submit it to me in a timely fashion so the underwriter has a chance to approve the submitted documentation.

Step 5: Firm Sale

Once you have met all of your financing conditions, I will instruct you to remove the “subject to financing” condition from your purchase contract. This is done through your realtor. You may remove other conditions at the same time (if they have been met), such as “subject to a satisfactory home inspection.” Once all of the conditions are satisfied, you have a “firm sale.” A firm sales means that you have unconditionally purchased the property. Mortgage instructions (paperwork) from the lender will be sent to the lawyer’s office at that time. If you do not have a lawyer, please let me know. I can send you a list of a few lawyers that I work with on a fairly regular basis.   

Step 6: Moving Details

The lawyer will receive and prepare your mortgage documents. Use this time to start preparing for the move.

Step 7: Lawyers

The lawyer will call you in to sign, usually about three to four days prior to the completion date. The completion date is the day the money is given to the sellers and the property is transferred to your name.

Step 8: Move In

Usually your possession date will be the day after the completion date.  This is the day that you receive keys and can move into your new home.

Step 9: First Mortgage Payment

Unlike with rent, which is paid at the beginning of the month, you make your mortgage payment at the end of the month. For example, if the purchase of your home was completed on June 1, and you chose monthly payments, you will not have a mortgage payment until July 1. If you chose weekly payments, the payments would come out at the end of every week. You will receive the details of the mortgage repayment from your mortgage lender.

Your Support Team

 When you purchase your home, there are a number of key players who will help you throughout the process.

Your REALTOR®

Your REALTOR® is your partner in the home buying process. Once your REALTOR® understands what type of home you are looking for, he or she will begin researching the market on your behalf. The REALTOR® will search all of the available properties for sale and will show you the ones in your price range that meet your criteria. Once you have found the home you are interested in, your REALTOR® will prepare an offer and represent you in the negotiation process.

Generally, you do not pay a fee to the REALTOR® who represents you when you are buying a home.  The REALTOR® is paid by the seller of the home. Real Estate Agents are licensed through provincial bodies and are knowledgeable about the markets they work in.

Your Mortgage Broker

Your mortgage broker is another key partner in the home buying process. This person will take time to understand your financial needs and will research the market to find a suitable mortgage product for you. Your mortgage broker will represent you to the lenders, and will negotiate terms on your behalf. Usually there are no fees to use a mortgage broker, as they are paid by the lenders. However, some mortgage brokers do charge a fee, usually if the property is unusual or the mortgage will be difficult to finance.   

Lender

Your mortgage broker will choose a suitable mortgage lender. The majority of your contact with the lender will be after your mortgage funds. You will receive contact information for when you want to make any changes to your mortgage in the future.

Insurer

If you have less than 20% of the value of the property as your down payment, you will be required to have mortgage insurance. Mortgage insurance protects your lender against any losses incurred due to default. Your mortgage broker and lender will arrange this insurance for you. The mortgage insurance companies in Canada are Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty. 

Appraiser

The appraiser’s role is to provide the lender with a market value of the home. The market value is the price at which the home would sell with reasonable exposure on the market to a large number of buyers. Your mortgage broker will arrange the appraisal for you. The cost of an appraisal is approximately $300 and is required if your mortgage is conventional (you have a down payment of 20% or more and the mortgage is not insured through CMHC or Genworth). The appraisal cost is the responsibility of the borrower.

Home Inspector

A home inspector provides you with information on the construction on your home. The inspector will inform you of any repairs that need to be done in the near future, and will let you know what types of repairs you can expect in the next few years. Your realtor can provide you with some names of quality home inspectors. The cost of the home inspection is the responsibility of the purchaser.

Lawyer

Your lawyer (or notary) will transfer the property to your name, and will draw up and register the mortgage documents. Your lawyer liaises with your lender and realtor to ensure they have all of the required paperwork to process the sale. Your mortgage broker will refer you to a lawyer if you do not have one. The cost of legal fees is the responsibility of the purchaser.

Documentation Required

In order to process your mortgage application, mortgage brokers require documentation to support your mortgage application. Please note that there may be other conditions not listed here that they might require.

Proof of Income

You will need to provide the following documents for proof of income:

Employees:

-       If you are salaried, confirm your salary amount and length of employment

-       If you are paid hourly, confirm your pay per hour, number of hours worked per week, and length of employment

Commissioned or self-employed:

Down Payment Verification

You will need to provide the following documents to confirm the source of your down payment: 

Additional Documentation

You will need to provide the following additional documentation:

*Notice of Assessment is the summary form Revenue Canada sends after your income tax has been filed. It specifies what you claimed on your taxes last year.  If you do not have a copy of your Notice of Assessment, you can call Revenue Canada directly to obtain one.

 

The Difference Between Mortgage Default & Mortgage Life/Disability Insurance:

High Ratio Mortgage Insurance/Mortgage Default:

Mortgage loan insurance is required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with little or no down payment — with interest rates comparable to those with a 20% down payment. As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between 0.65% and 3.35% depending upon how much of the purchase price/home value is financed with a mortgage loan. (Mortgage insurance premiums are higher for self employed individuals or rental properties. Please contact me for a quote).

Mortgage loan insurance is not to be confused with mortgage life or disability insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate or that your mortgage payment will continue to be paid should you become disabled. There are currently three mortgage default insurers in Canada: CMHC, Genworth and AIG.

Mortgage Life/Disability Insurance:

If you die or become disabled, your lender is still entitled to receive payment on your mortgage. If you become delinquent, the lender can foreclose on your home unless the mortgage is paid off or payments are made from some other source. A mortgage life insurance policy pays off your mortgage if you die. A mortgage disability policy covers your mortgage payments if you become disabled. Mortgage life/disability insurance is actually a specialized form of decreasing term insurance. This means that as your loan balance decreases, the amount of insurance decreases as well.

 

Estimates of Closing Costs

1. Legal Fees   

A lawyer or notary will be necessary in the home buying process. Your lawyer will prepare the mortgage documents, have you sign the documents, and will transfer the property to your name. ($1,000 to $1,500) 

2. Appraisal Fees

An accredited appraiser will look at your home and determine if the price you have offered is what the home is worth. The appraiser will compare recent sales of similar properties to determine the estimated value of your home. He or she will provide a report to your lender that confirms the value. (Approximately $300)

3. Property Tax Adjustment 

You may have to pay some of your annual property taxes at the time of closing. This would be done when you sign at the lawyer’s office. Because every situation is different, it is best to confirm with your lawyer what you will owe.

4. Interest Adjustment                                   

If you have chosen monthly mortgage payments, and your payment comes out on the first day of the month, you may have an interest adjustment. If the purchase of the home closes on May 29, for example, you will have to pay for three days of interest on your mortgage (May 29-31). If the purchase closes earlier in the month, you may have a larger interest adjustment. It is best to find out from your lawyer what your interest adjustment will be.

5. Title Insurance       

Title insurance is sometimes used instead of a survey, and may be requested by your mortgage broker, lender, or lawyer. Your mortgage broker, lender, or lawyer will discuss title insurance with you if it is applicable for your transaction. The estimated cost of title insurance is between $200-$300.

6. Fire Insurance

Fire insurance ensures you have adequate coverage to pay off your mortgage in the case of fire. The lawyer will want proof that there is fire insurance in place when you go in to sign the papers at his or her office. Ask your mortgage broker for a referral to an insurance agent who will be able to assist you.

7. High Ratio Insurance Premium

When borrowers have less than 20% of the value of the property as a down payment, they must pay a mortgage insurance premium. The premium varies, so you should check the amount with your mortgage lender. Most people will add this premium onto their mortgage. You also have the option of paying this amount up front.

8. Home Inspection

Many people choose to have home inspections, although most of the time it is optional. A home inspector will look through your home and provide you with his or her professional opinion on the construction of the home. The home inspector will advise of any maintenance required, and will let you know what kind of maintenance you can expect in the next few years.           

9. Survey        

Most financial institutions require surveys. Surveys confirm where the home is sitting on the lot and make the lender aware of anything unusual about the property. You may be able to get an acceptable copy of the survey from the previous owners, and save the survey fee.                                                                           

10. Utilities Connection Charges        

Some utilities charge a move or connection fee. You will need to contact each utility provider to find out their charge.

 Purchasing a new home is a very exciting (and stressful) time! Take your time to find the perfect property for your lifestyle and ensure you have the right professionals in place to ensure a smooth transaction.

I am dedicated, consistent, conscientious and reliable. I work hard to ensure that your financing is hassle-free and relaxed. If you have any questions in regards to mortgage financing, need a pre-approval or just need some information please contact me anytime!