The Mortgage Process
There are certain procedures to take if you are going through the process of purchasing a new home. You are going to want to have your "team" assembled. This will include your mortgage broker, your realtor, and your lawyer. But before you go and research all of your partnerships, you should first have a good idea as to what exactly you can feasibly afford. Below is a typical mortgage process.
First step before you shop for a new home to purchase is The Pre-approval
- Apply on line "click the button" application
- You will get a call from myself and we will go over your application
- Three forms will be sent out to you to read, sign and return to myself
- Consent form - allows me to do a credit bureau (once)
- Privacy act
- Disclosure form - tells you what I do and how I get paid.
- I will provide you with a list of documentation that I will need for the pre approval process. ie income
We will discuss where you are looking for a house, what the amount of the purchase, the taxes, condo fees, and how much you are putting down for a down payment. I will then pre qualify you to make sure all your ratios work before I pull the credit bureau. We will at that time determine when you are going to start the process and see if we need to do the credit bureau and send your deal to a lender for a pre approval and rate guarantee for 90 days while you are finding your dream home.
The Transition from the Pre-approval to Approval Process
**This is a very important part of every transaction**
You now go looking for your new house purchase with your realtor or on your own. When it is time to make an offer on the new home you will have to provide a "condition of financing date".
This is very important that you know that all your documentation has to be providing to the lender before this date so all the conditions can be removed and you have a final approval. Therefore when you are discussing this with your realtor and you have to get documents that may be hard to provide, you have to account for this in the date you are putting down for financing. You also must know that an appraisal in some areas take up to 5 business days to get from an appraiser.
As well, you must provide enough time for the lender to review and approve the documentation (and appraisal if necessary) before the end of the day on your Condition date. This condition of finance date is very important to you as a buyer. If your conditions are not lifted by the end of that day, the seller can refuse the right to proceed with you as a buyer, or can refuse to keep the conditions the same, i.e. the price of the home. Once the bank has approved your documentation, you may remove your conditions to finance.
Now if you are putting down 20% or more down as down payment on a home, then this is considered a "conventional" mortgage deal. Conventional mortgages require the buyer to provide an appraisal of the subject property to the lender or the bank that is providing the mortgage. This is when the broker or lender calls for an appraiser to go and do a full appraisal on the property you have placed an offer. Now if your down payment is less than 20% and the mortgage insurer (CMHC, GE, or AIG) the insurer will provide the bank a value of your new home. When your mortgage is going through a self insured lender than and appraisal is required no matter what the down payment.
Once you have made the offer to purchase and it is accepted the following documentation for submission to the lender for the approval will be need to be in my hands.
All necessary documentation should have been provided at the pre approval stage.
3 month bank statements on all the products of where the down payment is coming from along with the 1.5% closing cost (or lawyer quote). Any Gift letter at this time will be signed for the lender.
Offer to purchase
The offer to purchase and the MLS listing usually is email or faxed by the realtor to me. Condo documentation would be the last minutes of the condo board and condo financials are provided by the realtor to me as well. Once I have the offer to purchase I then complete your file and send it to the lender for approval. The lender approves the mortgage and sends out a mortgage commitment with conditions on it that have to be fulfilled by the client and facilitated by myself. Once we go over the commitment and provide all the documentation to complete the conditions the approval process is complete. The subject on the offer to purchase can then be removed.
After the conditions have been removed from the subject property you are purchasing, it is up to you the buyer, the broker, the financial institution, and the lawyer to co-ordinate the necessary paperwork to finish the process, and close your mortgage on time. If you do not already have a lawyer to handle the disbursements of funds, your realtor will likely have a referral for you, or you can take it upon yourself to shop around for one or ask your broker.
If you are an existing homeowner that is purchasing a new home, you may find yourself in a position to arrange "Interim Financing". Interim financing happens when the possession of your new home arrives BEFORE the sale of your existing home has gone through. You must have a firm sale on your current home for bridge financing to go through. Usually, the lender will be able to finance a short term loan to cover the deficiencies in the time gap. You do not need Interim Financing if your possession is AFTER the sale of your current home has gone through.
Between the "lifting of conditions" on the home and the actual closing of the mortgage, the following should have been completed:
- Provided the necessary documents to us for the purposes of lifting conditions (i.e. letter of employment, pay stub, Notice of Assessment (if applicable), Appraisal (if applicable), down payment verification (which can include 3 months bank statements, gift letter(s), investment statements, or a combination of anyone of those), current mortgage statement (if applicable), and supplied your offer to purchase for the new home and a sale agreement for your existing home (if applicable).
- Chosen your payment frequencies offered through the lending institution (i.e. monthly, bi-weekly, semi-monthly, etc.)& Signed a Pre authorized debt form provided by the lender
- Signed mortgage application and mortgage commitment - We will provide.
- Provided the lawyer's name, address, phone and fax#.
Once we have all the documents to the lender, the lender will then package the mortgage instructions (your file), and send it off to the lawyers office where they will arrange for a meeting time with you. When you receive this call, your mortgage process is close to being through. The lawyer will go over the legal mortgage documents one last time with you at this meeting, and arrange for your name(s) to be registered through land titles for your new property. Your lawyer will release the keys to you so that you can arrive to your new home on time. The moving and unpacking should be your next move!